What is a dividend divide tax?

Dividend divide tax is collected by the Indian government into publicly traded corporations, which decide to distribute profit to investors in the form of dividends or cash payments. The tax is controversial in the Indian business sector because investors are afraid of changes in the behavior of companies that may result from the motivational structure created by tax policy. However, the decision to tax corporation rather than consumers is largely political, rather than for economic reasons - economic theory of dividends and taxes shows that both options have the same impact on the economy. The tax since 2010 was officially 15 percent of the total amount of dividend payments. The effective tax rate, which is the amount that a company actually paid for the dividend distribution tax was almost 17 percent. Investors who receive dividends do not have to pay taxes. This is the approach of many countries, including the United States. Each investor must file forms determining his reception from dividends.

The theoretical point of view does not matter whether the government tax on dividends at business or individual level. This is because companies can predict the dividend divide -dividing tax, so they correspond appropriately to dividends. Therefore, if investors and companies are taxed with equivalent rates in different countries, the actual transfer of funds is the same.

Companies could decide to avoid taxes by distributing dividends. Instead, it could retreat in the company, which increases valuable market share. However, investors sometimes see dividends as a sign of society's strength, so stopping dividend payments, although accompanied by an increase in the price of shares, could discourage the investment.

Finally, the decision on tax companies or individuals is political. The government could choose between dividends tax and individual taxes based on how they think everyone will be admitted to the publicand. It also depends on structures that are already introduced in the ground. The distribution of taxation of society is much easier than relying on every individual to report his dividend income; However, if there is already a strong individual tax system, then dividend taxation at an individual level can make more sense than to create a new bureaucracy to collect dividend divide.