Government always try to make affords to avoid double taxation in India but their efforts is useless when same income becomes taxable 3 times.
In India it is a tax policy that Government taxed the income when company earns it and again it is taxed when it is passed on to the owners of the company through dividend. Though dividend is exempt but it becomes taxable in certain conditions.
Let see how same income is taxed 3 times.
When company earns profits it become chargeable to tax and company pays income tax at the rate 25% if turnover is below Rs 50 crore or in another case 30% on its profits.
Secondly after deducting income tax from profits ‘Profit after tax’ arrived and when company is distributing same profits to its owner then company is also paying ‘Dividend Distribution tax’ (DDT) u/s 115O at the rate 15%. Though DDT is exempt in the hands of shareholders U/s 10(34).
Thirdly when shareholders receives the same dividend and if it is in aggregates of more than Rs 10 lakhs, then shareholder have to pay income tax u/s 115BBDA at the rate of 10%.
Surcharge and Cess will also be included in above rates.
Keep reading! And reach out to us if you have any queries and you are looking for a CA in Gurgaon, Faridabad, Delhi for further clarification.