The government has decided to exempt dividend payments to Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) from tax deduction at source (TDS).

Presenting the Union Budget FY22, Finance Minister Nirmala Sitharaman said that the move has been made to provide ease of compliance.

Further, as the amount of dividend income cannot be estimated correctly by the shareholders for paying advance tax, I propose to provide that advance tax liability on dividend income shall arise only after the declaration/payment of dividend, she said.

In the previous Budget, the government had abolished the Dividend Distribution Tax (DDT) in order to incentivise investment. Dividend was made taxable in the hands of shareholders. In a major boost for the stock markets, Sitharaman proposed to enable deduction of tax on dividend income for Foreign Portfolio Investors at the lower treaty rate.

The decision has been acknowledged by financial investors and the BSE Sensex has surged over 2,000 points. At 2.33 p.m., Sensex was trading at 48,377.10, higher by 2,091.33 points, or 4.52 per cent, from its previous close. The Nifty50 on the National Stock Exchange was trading at 14,222.80, higher by 588.20 points, or 4.31 per cent, from its previous close.