Page 38 - Seniors Today Febuary 2020
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The affordable housing exemption date has been extended, and this will help developers
31.3.2021 and therefore, this will help Rs.63 lakh, there could be a Tax on them of
Developers engaged in such projects. about Rs.6 lakh, so the net in hand is about
An amendment to sec. 80EEA is also Rs.57 lakh.
proposed. This states that a deduction for The position for Companies receiving
interest on a loan taken from a financial dividend is on the same lines, but not
Institution for acquisition of a residential identical.
house in an affordable housing project will The law now is to be amended to provide
be allowed up to the extent of Rs. 1.5 lakh that there will be no DDT, but only regular
pa. One of the present conditions is that the tax in the hands of the recipient of the
loan should have been sanctioned between dividend.
1.4.2019 and 31.3.2020. Now this provision So, if a Company earns Rs. 1 crore and
is to be amended to say that the loan may be pays, Rs.25 lakh as its own Income Tax and
sanctioned at any time up to 31.3.2021. distributes Rs.75 lakh, this will be taxed in
the hands of the recipient. If he or she is in
Taxation of dividend the maximum bracket of 42.74%, then the
The Finance Minister stated in para 116 Tax could be about Rs.31 lakhs! This will
of her Budget Speech that the removal of leave only Rs.44 lakh with a highly taxed
Dividend Distribution Tax will lead to individual!
the government foregoing revenue of Rs. Of course, many shareholders will not
25,000 crore. be at the highest slab, and the rates of tax
This makes it appear that a bonanza is for companies are also different as are the
being given to Companies and tax-payers, rates for Non-Residents and for foreign
but this is not so. companies.
At present, if a Company earns say However, reverting to the “classical”
Rs. 1 crore, it first pays its Income-Tax. system, as the Government calls it, can
This may be about 25%. Then, it may mean much higher tax for many persons,
declare Dividend and pay DDT (Dividend and every shareholder will now once again
Distribution Tax) of about 20%. So if it have to have a proper account of dividend
declares dividend of say, Rs.63 lakh, the received, rather than merely treating it
DDT will be approximately Rs.12 lakh. as exempt, or practically exempt, from
Then, if individuals receive this dividend of Income-tax, as we are able to do now.
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