Dividend payouts from companies rise manifold ahead of abolition of DDT
According to market participants, the payout is to reduce the tax burden of promoters who will have to pay tax of over 40% from April onwards
February 27, 2020 / 11:48 AM IST
Dividend income of investors has risen significantly as more than double the companies have announced dividends compared to the year-ago period, with more on cards, exchange releases suggest.
The companies are giving out fat dividends before the new Budget proposal of shifting the tax burden of dividend income from company to individuals comes into effect from April 1.
Around 204 companies have announced dividends since February 1 and as many as 32 will discuss dividend payment in their upcoming meetings. In comparison, only 90 companies declared dividends in the year-ago period.
Some of the biggest payouts came from Bajaj Auto which declared an interim dividend of 1,200 percent, or Rs 120, per share and Shree Cement doled out 1,100 percent interim dividend. Meanwhile, Symphony declared a special dividend of 900 percent.
According to market participants, the payout is to reduce the tax burden of promoters as most of them hold equity individually or in trusts and will have to pay tax in excess of 40 percent from April onwards.
At present, dividend income up to Rs 10 lakh from domestic companies are exempt from tax liability at the hands of the shareholders, while they are taxed at 10 percent for dividend income above Rs 10 lakh. Under the new regime, shareholders will have to pay taxes on dividend received as per their respective tax slabs, which can go as high as 43 percent.
Dalal Street witnessed a similar bout of dividend payment in 2002 when erstwhile finance minister Yashwant Sinha had proposed to make dividends taxable in the hands of the shareholders.