Tuesday, November 06, 2007

Reasons why the PN/ODI market is attractive

The edit in Business Standard today points out that one of the many reasons why global customers favour the PN/ODI market lies in the Indian tax treatment of derivatives, where profits are treated as ordinary income.


  1. I do not agree with BS that why dividend income to any person should not be taxed. It is fine that Govt should not tax dividend income from any company to corporate on double taxation argument. Dividend income to any individual should be taxed, as we tax income from Fixed Deposit and Postal Savings. Equity and Fixed Income should be treated at par.
    In UK, Dividend Income to any person is taxed.

  2. Suppose a company earns income, pays corporation tax on it, then pays out dividend, then the shareholder pays income tax on it. So the shareholders who came together to create the company are taxed twice merely because they made the mistake of pooling their capital to form a company. This is wrong from first principles of tax policy, even if it's done in some countries.

  3. True. Double taxation. Thats why it was done away with in the first place.


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