PRAMOD SHRIKANTH D

Currently the Income Tax provisions mandate the corporate assessees to pay the dividend distribution tax at 15% on the amount declared or distributed to shareholders. Also, under the present scenario, the companies have to pay income tax at 30% on the net profit before appropriation.Due to these parallel tax clauses in the statute book, distributed profit/dividend as well as profit arrived before appropriation necessitate the companies to pay a huge amount of tax. The Government’s rationale behind taxing the dividend distribution is not correct even though the shareholders are exempt from paying the tax on the amount so earned by them in the form of dividend.This has created a wrong precedence in tax collection mechanism over several years. So the Government has to rationalize the provision either by withdrawing the dividend distribution tax or by giving the deduction to the extent of dividend paid while computing the taxable income of companies.A large number of corporate assessees are not in a position to manage their cash flows because of such tax payments on the same income under multiple tax clauses.
PRAMOD SHRIKANTH D
A Bangalore based Chartered Accountant