After all, capital gains tax is much lower, at 28.5% for unlisted shares, before accounting for indexation benefits. They could still consider a buyback of shares, where the tax incidence is relatively lower compared to dividend income. Nearly two decades ago, the Vijay Kelkar task force on direct taxes had recommended bringing taxation on dividend and capital gains on par. A uniform policy would have enabled Zerodha’s promoters to take out liquidity by receiving dividend and avoid the negative publicity of receiving unusually high salaries. But when seen in the backdrop of adverse tax implications of receiving dividend, the news doesn’t so much reflect poorly on Zerodha’s remuneration policies, as it does on India’s tax policies.

Source: Mint May 31, 2021 17:15 UTC