What It Means
DDT, Dividend Distribution Tax, was a tax a company paid on the dividends it distributed to shareholders, deducted before the dividend ever reached an investor's account. It no longer exists. Budget 2020 abolished DDT effective FY 2020-21, and dividends are now taxed directly in the hands of the investor instead, added to their total income and taxed at their applicable income tax slab rate.
How It Worked
Under the old regime, a company paid DDT (an effective rate of about 20.56%, once surcharge and cess were added to the base 15%) on the total dividend amount before distribution, regardless of which tax bracket the receiving shareholder actually fell into. A retail investor in a low tax bracket and a high-net-worth investor in the top bracket both effectively bore the same DDT rate through the company. That's part of why scrapping it and shifting the tax to the investor's own slab was framed as a fairness fix, even though it meant many smaller investors ended up paying more, not less, after the change.