Indian companies distributing or declaring dividends are liable to pay DDT (dividend distribution tax) at 15%. This rate is required to be grossed up; consequently, the effective rate of DDT is 20.36%. However, the Finance Act 2020 has abolished the DDT with effect from 1 April 2020, hence dividends distributed after that date will be taxable in the hands of shareholders (20% for dividends paid to non-residents; at the normal tax rates applicable to the shareholders for dividends paid to residents).
A securities transaction tax is applicable to transactions involving the purchase/sale of equity shares, derivatives, units of equity-oriented funds through a recognised stock exchange, or the purchase/sale of a unit of an equity-oriented fund to any mutual fund. The rates vary from 0.001% to 0.125%, depending upon the type of securities.
A property tax is levied by the governing authority of the jurisdiction in which the property is located, with rates varying from city to city. Stamp duties apply to all legal property transactions, with different rates being set by each state.
Social contributions paid by the employer amount to 12% of the employee's salary (8.33% are allocated to the Employees’ Pension Fund, capped at INR 15,000/month for Indian employees). A reduced tax rate can apply to individual and Hindu Undivided Family (HUF) taxpayers.
From 1 April 2020, an equalisation levy of 2% applies on the consideration from e-commerce supply and services made or provided by an e-commerce operator without a PE in India, and whose sales, turnover, or gross receipts from the e-commerce supply and services are at least INR 20 million during the tax year. The sale of goods or provision of services by an e-commerce operator to an e-commerce participant is subject to a 1% withholding tax.
An equalisation levy of 6% on the amount of consideration in excess of INR 100,000 applies with regard to specified services (e.g. online advertising, the provision of digital advertising space, and other related facilities or services) received by a nonresident without a permanent establishment in India. The levy must be withheld by a resident payer or a non-resident payer with a permanent establishment in the country.
The Finance Act 2022 included measures to incorporate Virtual Digital Assets (VDAs) such as cryptocurrencies, NFTs, and other similar assets into the tax system. Under these provisions, profits earned from the sale of VDAs will be subject to a 30% tax rate, with no allowance for deductions other than the acquisition cost. Additionally, any losses incurred from the sale of VDAs cannot be offset against other income in the current or future years.
When Indian companies repurchase shares from their shareholders, they must pay an extra tax calculated as 20% of the difference between the consideration paid for the buyback and the original issue price of the shares, plus a 12% surcharge and a 4% health and education cess.