NEW DELHI: India is considering changes to its dividend distribution tax, according to people with knowledge of the matter, in a bid to goad companies to boost spending and revive foreign fund inflows.
The budget statement due February may include a proposal to tax dividends once they are paid to shareholders, rather than the current system where the company paid the levy, the people said, asking not to be identified as the deliberations are private.
The move would be the latest in a series of steps from Prime Minister Narendra Modi’s government to prop up growth from the lowest in six years.
Over recent months, authorities have slashed corporate taxes, rolled back a levy on global funds, injected US$10bil into struggling state banks, and eased foreign investment rules to encourage companies to boost spending.
The impact of the dividend tax has been prompting firms to invest in debt “thereby depriving companies of much-needed equity, ” to expand, said Daksha Baxi, Mumbai-based head of international taxation at law firm Cyril Amarchand Mangaldas. — Bloomberg