New Delhi: Chief Economic Advisor Krishnamurthy Subramanian has strongly defended the substantive relief given to the corporate sector in this year’s budget arguing that it is necessary for kick-starting the virtuous cycle of private investment.
He said it will eventually pave the way for higher growth rate as abolition of taxes like dividend distribution tax (DDT) will correct the distortion in the country's tax regime which discouraged sovereign wealth funds and pension funds from investing in India.
“When you take the dividend distribution tax then the fact is that it’s going to be taxed in the hands of investors and not the corporate. It’s quite important, as you have pension funds, insurance companies, sovereign wealth funds which are usually not taxed in their jurisdictions,” said Chief Economic Advisor Krishnamurthy Subramanian.
“When the DDT was charged on corporates then these entities had to pay taxes even though they are not taxable,” he told ETV Bharat in an exclusive interaction in New Delhi while explaining the rationale behind cutting the Corporation Tax last year and abolition of DDT in the Union budget.
In her second budget, Finance Minister Nirmala Sitharaman abolished the dividend distribution tax, this is the second booster shot given to industry by Prime Minister Narendra Modi’s government in the last six months.
In September last year, Sitharaman had announced the biggest cut in Corporation Tax in recent times to encourage the private sector to increase the investment as the GDP growth declined to just 5% in the first quarter of FY 2019-20.
