SINCE THE PROFIT WHICH IS DISTRIBUTED AS DIVIDEND IS A PROFIT WHICH ALREADY HAS SUFFURED CORPORATE TAX @33.66%. SO THE CONTENTION OF THE I-T DEPARTMENT THAT THERE IS A EVASION OF TAX BY DECREASING THE SALARY AND OTHER PERKS OF THE SHAREHOLDERS, WHO ARE ALSO THE DIRECTOR OF THE COMPANY, AND PAYING HIGHER DIVIDEND IS NOT TENABLE. IN FACT TAXING THE DIVIDEND ITSELF AMOUNTS TO DOUBLE TAXATION AND SHOULD BE ABOLISHED.
RE:UNFAIR
by Vidya Dhore on Feb 19, 2008 04:17 PM Permalink
See, Income in the hands of Company and in the hands of an individual (shareholders)are two different things as per the Income tax Act. So if the company pays tax on its income and then distributes it as dividend to its shareholders, again it is income of that shareholders and so it should be taxed accordingly
There is no logic in payment of Diviedent distribution tax by the companies. The situation explained above was very much predicted on introduction of this. This helps the rich to avoid the high rate taxes and need to be scrapped. Dividents are to be taxed in the hands of shareholders.
Why should any promotor fix their annual salary at lower level and take rest of the money through dividend?
Take a case study:
PBT (minus salary) of a company = 100 Salary = 0 Corporate tax= Approx 33/- Divedend tax= 12.5% of 67 = 8.4 Money in the hand of with the promotor: 100-33-8.4=58.6 (tax free)
PBT (salary not included) of company: 100 Salary: 100 Corporate tax: 0 Dividend tax: 0 Personal Tax of promotor: 30 Money in the hand of promotor:60 the benifit of tax slab and 80C
Neither IT nor promotor should think in this front
RE:Low salary by promotors?
by Brajesh kumar on Feb 18, 2008 10:45 AM Permalink
Sorry, I made a mistake. In the second case Money in the hand of promotor is 100-30=70 Plus the benefit of tax slab and 80C
officials & also the press to a large extent always want controls as it benefits them with discretionary powers all distribution taxes on dividends should be removed as it amounts to double taxation instead all prerequisites of officials & politicians should be taxed
