DDT Budget 2020: Dividend Distribution Tax removed — What it means for you as an investor

DDT Budget 2020: Apart from announcing a new income tax slabs, the Finance Minister announced the removal of the Dividend Distribution Tax (DDT). According to the tax and investment experts, it will bring transparency in dividend payment as from now on, the company need not deduct DDT Tax. An investor will get the entire amount that accrues through investment and the tax liability has to be adjusted by the investor only.

Speaking on the DDT removal and its impact on investors, SEBI registered tax and investment expert Jitendra Solanki said, "The Government of India has taken the right step by announcing the DDT removal in budget 2020 (#BudgetOnZee) as it will bring transparency in one's investment and return. From now onwards, the investor will handle the tax liability rather than the company or mutual fund houses." 

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Solanki added that tax outgo will remain the same but the company will not be asked to deduct the DDT at source while distributing the dividends of an investor. An investor will get the returns his investment has generated. After that, the investor will pay the DDT so that he or she could know how much his investment earned and how much went into tax outgo. Solanki said that in simple terms, DDT tax has been moved from indirect tax to direct tax category.

Solanki said that there have been complaints by investors that mutual fund houses deducted more money in the name of DDT while on company's part, mutual fund houses used to complain that an investor calculates income on the basis of his or her investment and the return he or she has got. As the mutual fund houses used to pay dividends after deducting the DDT, an investor used to understand that credited amount as the mutual fund manager's performance which was incorrect. From now onwards, an investor will be able to know how much the mutual fund manager has generated returns on the investor's money.