Shareholders must receive the benefit of the tax levied on their dividends, according to Punit Shah, partner at Dhruva Advisors. Shah suggested the government to address the issue in Union Budget 2019 due later this week.
“Taxation on dividends is very harsh and there is a case to revert to old regime where the tax was withheld and the dividend recipient gets the credit,” he told BloombergQuint. “Also, few investors keep harping on the fact that there is triple taxation in India—corporate tax, dividend distribution tax and also income tax in the hands of shareholders. That concern must be addressed.”
Dhurva Advisors also called for repealing the long-term capital gains tax, introduced in February 2018, levied on the sale of shares. It impacted the “attractiveness” of the country as an investment destination in the eyes of foreign institutional investors, said Shah.
Budget Expectations From The Private Equity Industry:
- Capital gains should be made pass through Real Estate Investment Trusts. Pass through is an arrangement where income generated must be taxed in the hands of investors and not the entity which generates it.
- The reduction of corporate tax to 25 percent from 30 percent proposed earlier must be implemented fully. The benefit has trickled down to only selected companies currently.
- Alternative Investment Fund Category 3 models need tax pass through.
- Need liberalisation of norms under Section 9A of the Income Tax Act where a domestic manager can manage overseas funds without attracting tax in India.
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