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.