(a) whether foreign investors who invests in India use to
get a return by way of tax free dividend prior to Finance Act,
2002;
(b) if so, whether the Finance Act, 2002 has levied tax on
such return;
(c) if so, whether the Government`s objective to woo foreign
investors is likely to suffer a major set-back due to this
position;
(d) if so, the details thereof; and
(e) the steps taken or being taken by the Government to woo
foreign investors to invest in India and make it more
investors` friendly?
MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI GINGEE N.RAMACHANDRAN)
(a) & (b) Prior to amendment made through Finance Act,
2002, any amount declared, distributed or paid by way of
dividends by an Indian company was charged to additional
income-tax at the rate of 10%. Through Finance Act, 2002,
the incidence of tax has been shifted on to the shareholder
receiving the dividends and accordingly will be taxed either
at the rate of 20% or the rate mentioned in the Double
Taxation Avoidance Agreements, whichever is lower, and the
foreign investor will get the credit of tax withheld in India
in his own country;
(c) No Sir, in view of the answer to parts (a) and (b) above;
(d) Does not arise in view of answer to part (c) above;
(e) With a view to attracting more FDI, the Government have
already put in place a liberal, transparent and investor
friendly FDI policy where most activities fall on automatic
route for FDI up to 100% except a small list.