The Curious Case of the Indian Dividend Distribution Tax – Inverse Split-Rates on Corporate Profits? Or Source-Agnostic Levy?

Abstract

Is the Indian dividend distribution tax an inverse split-rate on corporate profits, thereby limiting the extent to which profits can be distributed to shareholders? Or is it a source-agnostic levy, which could also be paid out of a company's capital if all of the company's profits were distributed to shareholders? This article examines these fundamental questions about the Indian dividend distribution tax.

Keywords: Tax policy, tax law design, dividends, secondary taxes, corporate taxation, dividend distribution tax, international tax, taxation