---
title: "Dividend Distribution Tax (DDT): Meaning & Abolition"
description: "Dividend Distribution Tax (DDT) was a levy on dividends paid by Indian companies, abolished in 2020, impacting taxation for shareholders and UPSC candidates."
url: "https://modeldiplomat.com/learn/glossary/dividend-distribution-tax"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- Dividend Distribution Tax was a levy imposed on Indian companies on the dividends they distributed to shareholders, abolished from April 2020 and replaced by taxation in shareholders' hands.
- Why was the Dividend Distribution Tax abolished in 2020?
- What was the effective rate of DDT before abolition?
- How does DDT differ from TDS on dividends under the current regime?
- Did DDT apply to mutual funds and share buybacks?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

Dividend Distribution Tax was a levy imposed on Indian companies on the dividends they distributed to shareholders, abolished from April 2020 and replaced by taxation in shareholders' hands.

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## Timeline

1. 1 April 2020

   The decisive change came with the Finance Act, 2020, which abolished DDT with effect from (assessment year 2021-22).

2. 1 February 2020

   Then Finance Minister Nirmala Sitharaman, in the Union Budget presented on , announced that dividends would henceforth be taxed in the hands of recipients at…

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Example

In the Union Budget presented on 1 February 2020, Finance Minister Nirmala Sitharaman abolished the Dividend Distribution Tax, shifting dividend taxation to recipients' hands from 1 April 2020 to attract foreign portfolio investors.

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