- Government had constituted a committee to draft a new direct tax law to replace the existing Income Tax Act,1961.The committee was headed by Akhilesh Ranjan.It has submitted its report to the government.
- The task force has recommended retaining the long-term capital gains (LTCG) tax and the securities transaction tax(STT) while abolishing the dividend distribution tax(DDT).
- The proposed move to withdraw the DDT would help encourage investments by addressing multiple taxation of income and by bringing down the effective tax rate on companies.
- A dividend is a return given by a company to its shareholders out of the profits earned by the company in a particular year.They are usually given in proportion to the number of shares owned.
- Dividend distribution tax is the tax imposed by the Indian Government on indian companies according to the dividend paid to a company’s investors.At present,the DDT is 15%.
- Besides,the task force has proposed to retain the securities transaction tax(STT) for its simplicity in collection and assured revenues.The STT is a direct tax payable on the value of taxable securities transactions done through a stock exchange.
- Further,Long term capital gains(LTCG) tax refer to the gains made on any class of asset held for a particular period of time.In case of equity shares, it refers to the gains made on stocks held for more than one year.
- In other words,if the shares are bought and held for more than a year before selling, then the gains, if any, on the said sale are referred to as long term capital gains or LTCG.
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