THE INDIAN GOVERNMENT proposed in its latest budget to resume taxing shareholders on dividends rather than impose a distributions tax on the company paying the dividend.

Companies paying dividends are currently assessed a 10.2% distributions tax.  This tax would be scrapped, and the country would revert to taxing shareholders on the dividends they receive.  Intercompany dividends within India would be exempted from taxes.  The change should revive interest in investing into India through intermediate countries, like Mauritius, with favorable tax treaties.

The government also proposed a 15% “depreciation bonus” for investments in new plant and equipment after April 1. The investment either would have to create a new industrial unit or else expand the installed capacity of an existing industrial unit by at least 25%.

Keith Martin