Surcharge on dividend Income shall be capped at 15%. This comes as a savior for High income people

written by Income tax Expert | May 6, 2020

As we know that Budget 2020 has scrapped Dividend Distribution Tax and hence now dividend distributed, declared and paid after 01.04.2020 shall be taxed in the hands of people receiving it.

Now there were few people who were not happy with this and there were few people who were happy with this news.

Basically people who are in lower tax bracket they were till now paying 20% indirectly from their dividend, hence they were sad and on the other hand people who were in 30% slab rate were happy that they were only paying 20% tax on such income and hence they were sad.

Now with this each one will have to pay tax according to their individual slab. However there was a hidden provision in surcharge which no one talked about much and many people were of the opinion that since tax on dividend is based on slab rate may be the ultra rich people will have to pay 42.75% tax even on their dividend income.

However, if you read the recent amendment in Part III of First schedule of Finance Act, 2020 you will notice that in the surcharge section it has been mentioned that:

“Provided that in case where the total income includes any income by way of dividend or income chargeable under section 111A and section 112A of the Income-tax Act, the rate of surcharge on the amount of Income-tax computed in respect of that part of income shall not exceed fifteen per cent”

Thereby if a person who is even having total income above Rs. 2 crore, surcharge would be capped at 15% and if his income is below 1 crore surcharge would be 10%.

This would be a welcoming news for many big investors as many were worried on paying high taxes on dividend income.

 

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