Concessional tax rate on foreign dividend- Income tax

1. Existing provision:

  ■   As per section 115BBD, the dividends [as per clause (22) of section 2 but not including sub-clause (e)] received by Indian companies from foreign companies are taxable at a concessional rate of 15%.

  ■   This benefit of lower rate was available only for the Assessment Years 2012-13, 2013-14 and 2014-15.

2. Proposed amendment:

It is proposed to delete the restricted applicability of this section to Assessment Years 2012-13, 2013-14, 2014-15 and to extend the benefit of taxing the said dividends at the rate of 15% beyond Assessment Years 2014-15 and thus for all the subsequent assessment years starting from Assessment Year 2015-16.

This amendment will take effect from April 1, 2015 and will thus apply from Assessment Year 2015-16.

3. Conclusion

The Finance Minister has taken the right initiative by extending the benefit of taxing dividends at lower rate to attract foreign exchange by way of repatriation of dividends from the overseas investments made by Indian companies.

In the present scenario when Indian entrepreneurs are expanding their wings abroad this amendment to section 115BBD will give them reason for bringing back the income home. This will result in FOREX inflows as well asfurther investments in India
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