New Delhi, Jan 14 (PTI) Industry body CII has soughtrationalisation of the dividend distribution tax rate to 10per cent in the upcoming Budget to encourage participation ofdifferent stakeholders in the country's financial markets.
Alternatively, to negate the multiple level taxationissues pertaining to dividend distributed, the dividend payingcompany should pay tax on its profits, including distributedprofits at corporate rates, the chamber said in the detailedrepresentation submitted to the government for consideration.
Dividend should be taxed at the hands of the non-corporate (leveraged) shareholders as normal income, andexpenses should be allowed against such dividend in full.
"Conducive taxation framework is a vital cog in thewheels of the financial markets and has the potential to makeor break the market," CII Director General Chandrajit Banerjeesaid.
Considering that the financial markets are the majorprovider of risk capital and debt capital, it is important tohave conducive tax policies for enabling participation of allstakeholders in the markets, he added.
On the with-holding tax provisions for foreign portfolioinvestors (FPI), CII has recommended that the reduced taxshould be made perpetual and not expire after June 2020.
Currently, with-holding tax deduction at source oninterest payments to FPIs stands at 5 per cent on investmentsin rupee denominated domestic corporate bonds. This rate wasreduced from 20 per cent to 5 per cent and is made availabletill June 2020.
"FPIs interest in participation in Indian economy isincreasing due to the sound economic growth of the country andthe bare minimum incentive they want is tax certainty in thelong term," CII said, adding that it may be worthwhile togrant exemption from with-holding tax to FPIs to incentivisetheir participation in municipal bonds, arguing that this mayhelp in bringing long term money from pension funds.
The industry body has also demanded that the holdingperiod for units of debt mutual fund must be restored to 12months from 36 months to qualify as long-term capital gainsand bring it at par with equity market.
CII has also sought exemption of the borrowing chargespaid to National Securities Clearing Corporation Ltd by theborrower on securities borrowed under the Securities andLending Borrowing scheme from provisions of tax deducted atsource. PTI RSNBAL.
This is unedited, unformatted feed from the Press Trust of India wire.