InvestorQ : Will the abolition of DDT on equities and equity funds be positive for equity markets?
Neelam Naik made post

Will the abolition of DDT on equities and equity funds be positive for equity markets?

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Priyanka N answered.
1 year ago
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What you need to realize is that while the DDT has been abolished, the Budget 2020 has reintroduced tax on dividends in the hands of the investor and now dividends will be considered as other income in the hands of the investor and taxed at the peak rate applicable. For example, if you are in the 30% tax bracket, then your tax applicable on your dividends will be 30% plus surcharge and cess as applicable.

This abolition of DDT will have two effects. Firstly, for the small investors who are not in the peak tax limit, this will be positive because they are not subjected to DDT unnecessarily. On the other hand, let us say there is the promoter of a company who is earning a big sum as dividends. They will have to pay tax at the peak rate of 33% and if they are in the higher income brackets (as is likely), their liability will be closer to 43%. Hence dividends are going to become very expensive for large shareholders.

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