How will dividends be taxed in the new arrangement and did the budget make some procedural improvements in taxation?

There are some interesting changes pertaining to the taxation of dividends. Currently, equity dividends attract DDT at 15% with effective cost at 20.56%. However, the DDT on equities and equity funds is being scrapped fully. The DDT on debt funds will, however, continue at the extant rates. Now any dividend earned by you on equities or on equity funds will have to be shown separately under the head of “Other Income”. These dividends will now be taxable at your peak taxation rate based on your total taxable income. Now, promoters and substantial holders may end up paying tax at 43.5% and that could be a dampener. In addition, all dividends will now be subjected to TDS at the rate of 10% at time of payment.

To be fair, the Budget 2020 has also made its attempt to simplify the process for taxpayer. Taxpayers will have a window under the “Vivaadh se Vishwas” scheme where they can pay just the disputed tax without penalty and interest by March 31st. The budget has also moved all income tax notices and even appeals to the impersonal model. But there will be one big advantage in shifting to the new tax regime. You will be saved the rigor of filing your tax returns as your returns will come pre-filled online. That should surely be something for taxpayers to cherish!