Budget impact: Dividend income of private trusts under tax ambit
By DSIJ Team |
2/3/2017 3:55 PM Friday
Promoters who had set up private trusts from the perspective of succession planning will find the Union Budget 2017 unappetising. Last year, the Budget introduced a tax levy of 10 per cent for individuals and firms that earned dividend income of more than Rs 10 lakh a year.
Now from 2017 onwards, private trusts come within its ambit. Domestic companies, charitable trusts and similar non-profit entities continue to remain exempted from this levy. According to reports, the revised provisions have been introduced to provide parity between rich shareholders who directly held shares and those that held it via private trusts.
Corporate giants like Azim Premzi and Mukesh Ambani who posses private trusts will also attract tax levy. For instance, Azim Premji, in his personal capacity, held 9.34 crore shares (or 3.78 per cent) of the total shareholding. The company declared a dividend of Rs 6 per share and Premji earned a gross dividend of Rs 56.04 crore which would attract 10 per cent levy. Now, even dividends earned by Azim Premji Trust (if it is not a charitable trust) will attract such a levy.
Hence, the provisons are being revised to provide parity between shareholders who hold it via private trusts as well as shareholders who hold it directly.
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