All you need to know about the 10% TDS on DDT regime

Taxes on DDT (Dividend Distribution Tax) have been a subject of deliberation and discussion. Given the latest changing dynamics of the tax regime, it wouldn’t be wrong to say that there are clouds of confusion around the same.

As per the latest budget proposal, the DDT which was earlier paid by the companies declaring the dividends has been scraped, making way for TDS (Tax Deductible at Source). Taking it further is the fact that the mutual funds or the company distributing the dividends will be deducting the TDS amounting to 10%. So, to clarify the same – it has been proposed to levy a TDS of 10%. on a dividend amount paid by the company to the shareholder. The TDS system is applicable to the dividend amount that is more than 5,000 a year.

Further on – with the introduction of TDS, it is also significant to be clear that the tax will only be applicable on Dividend Payment and there shall be no tax to be deducted by mutual funds or income – depending on the nature of capital gains.

Dissecting the capital gains into two parts: there are short term capital gains – ie: when you can redeem the money in just one year with a tax levied. And there are long term capital gains, where you can redeem after 365 days and there is no tax deducted on the same.

While there are many implications of this new tax regime being predicted, here’s hoping that it serves to the benefits of the masses.