21: Is there a case for dividend distribution tax

Mint Views Daily Dispatch

According to reports, the government is planning to scrap the dividend distribution tax paid by companies. One argument is that taxing dividends amounts to double taxation since the profits of the company, from which dividends are distributed, are already subjected to tax. In addition, we need more people to buy shares to expand our capital markets, and such disincentives can place hurdles. But in a country like India where there is wide inequality in the distribution of wealth, such a move might be seen as favouring capitalists, or the rich, at the cost of the middle class, which pays high income tax.