ASIA: In a relief to HNIs, dividend income surcharge now restricted to 15%.

As published on financialexpress.com, Wednesday 25 March, 2020.

The Finance Bill, 2020, passed by Parliament on Monday provided relief to the high net-worth individuals (HNIs) with a cap on surcharge of 15% on dividend income as opposed to surcharge of up to 37% on taxable income.

This comes after the government reverted to classical way of taxing dividend in the hands of recipient rather than the corporate. However, this means that dividend income would attract surcharge applicable on the taxable income — which is 25% for Rs 2-5 crore of annual taxable income and 37% for above Rs 5-crore income.

“The amendment in the Finance Bill provided that in the newly introduced classical system of taxation of dividend, the incidence of surcharge on dividend income would not exceed 15%. This system would also not lead to unfair tax burden for the dividend earners who are in lower tax brackets,” a government official said.

Additionally, the Finance Bill provides the same benefits to pension funds as were available to sovereign wealth fund investing in eligible infrastructure projects.

The benefits include exempting dividend, interest and long-term capital gains income, earned from debt or equity investments made on or before March 31, 2024, in eligible infrastructure or other notified business entities.

The provisions include investment in InvIT, AIF- Category-I, Category-II which invest in infrastructure sector would also be eligible for such exemptions.

Further, the Finance Bill exempted the unit-holder of SPV, which are investment vehicles for REIT/InvIT, from paying tax on dividend if it has opted for the concessional corporate tax scheme of 22%.


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