Berger Paints Updates on Dividend Tax Withholding

Berger Paints India Limited on June 12, 2025, informed stock exchanges about a communication being disseminated to its shareholders concerning the deduction of tax at source (TDS) on dividends. This initiative aligns with the provisions of the Income Tax Act, 1961, as amended by the Finance Act, 2020, which mandates that dividends paid or distributed by a company after April 1, 2020, are taxable in the hands of the shareholders.

Detailed Analysis: Understanding the Tax Shift and Company's Action

The communication from Berger Paints addresses India's dividend taxation framework, implemented from April 1, 2020. Before this date, domestic companies were subject to Dividend Distribution Tax (DDT) on dividends they declared, distributed, or paid. As a result, such dividends were generally exempt from tax in the hands of the shareholders. The Finance Act, 2020, however, abolished the DDT system. This legislative change reinstated the classical system of dividend taxation, where the dividend income is taxed directly in the hands of the recipient shareholders according to their applicable income tax slab rates.

This amendment was introduced with objectives including enhancing tax equity and attracting greater foreign investment, as DDT was perceived as a surrogate tax that did not permit foreign investors to claim tax credits in their home jurisdictions. For domestic shareholders, particularly those in lower income tax brackets, the revised system could prove advantageous. Conversely, shareholders in higher tax brackets might experience an increased tax liability on their dividend income.

Berger Paints' Proactive Shareholder Engagement

In response to these regulatory requirements, Berger Paints India Limited is undertaking proactive measures to ensure its shareholders are thoroughly informed. According to the company's exchange filing, the shareholder communication is designed to:

• Explain Tax Deduction at Source (TDS): Provide clarity on the mechanism through which the company will deduct applicable taxes before disbursing dividends.
• Detail Withholding Tax Rates: Inform shareholders about the prescribed TDS rates pertinent to dividend income. These rates can differ based on factors such as the shareholder's residential status (resident or non-resident) and the submission of their Permanent Account Number (PAN). For instance, failure to provide PAN can attract a higher TDS rate.
• Provide Necessary Annexures: Furnish relevant forms and documents that shareholders may require for compliance purposes. This could include forms for non-residents to claim benefits under tax treaties or declarations (like Form 15G/15H) for eligible resident individuals seeking non-deduction or lower deduction of tax.

This comprehensive information is being distributed to shareholders whose email addresses are registered with Berger Paints, its Registrar and Share Transfer Agent (RTA), or the Depositories (NSDL/CDSL). The company also indicated its intent to reach other shareholders "as per applicability," thereby aiming for extensive dissemination of this crucial information.

Shareholder Impact and Responsibilities

The direct taxation of dividend income and the associated TDS mechanism are the primary implications for Berger Paints' shareholders. To navigate this effectively, shareholders are advised to:

• Ensure Accurate Records: Verify and update their PAN, residential status, and contact information, particularly email addresses, with the company's RTA or their Depository Participant. Inaccurate or missing PAN details can result in TDS being applied at a higher rate.
• Understand Tax Implications: Evaluate how dividend income will be taxed under their personal income tax slab.
• Review Company Communication: Meticulously examine the communication and accompanying annexures from Berger Paints. This will help them understand the specific TDS procedures, applicable rates, and any actions required on their part, such as submitting Form 15G/15H if eligible, or providing tax residency certificates for non-residents to avail treaty benefits.
• Claim TDS Credit: Remember that the TDS deducted by the company can be claimed as a credit against their total tax liability when filing their income tax returns. Details of the TDS should be reflected in their Form 26AS.

This communication is vital for shareholders to manage their tax obligations efficiently and ensure full compliance with current tax laws.

Additional Context: Corporate Governance and Transparency

Berger Paints' initiative to disseminate detailed tax-related information is a testament to sound corporate governance. By proactively clarifying complex tax regulations and their impact, the company assists its shareholders in understanding and meeting their obligations. The decision to make this communication and related annexures available on the company's investor services portal, accessible at https://www.bergerpaints.com/investors/services, significantly boosts transparency and accessibility for all stakeholders.

Such proactive communications play a crucial role in fostering investor confidence, particularly within a dynamic regulatory environment. They help mitigate potential grievances concerning tax deductions and ensure that shareholders are well-prepared.

Market Impact and Investor Sentiment

While this announcement is primarily informational and procedural, rather than a new financial disclosure that would typically influence stock prices, it positively contributes to investor sentiment. It showcases Berger Paints' dedication to shareholder welfare and strict adherence to regulatory compliance. The clarity provided on tax procedures can aid investors in their financial planning related to dividend income from the company.

The stock market generally perceives such transparent communications in a positive light, as they reduce ambiguity. However, the direct impact on Berger Paints' share price from this specific announcement is expected to be neutral. This is because the communication pertains to a tax law change that has been effective for several years and applies universally to all dividend-paying Indian companies. The principal takeaway for the market is the company's diligence in keeping its shareholders informed about processes that directly affect their financial returns.

Berger Paints India Limited is listed on the BSE Limited (Scrip Code: 509480), the National Stock Exchange of India Limited (Scrip Code: BERGEPAINT), and The Calcutta Stock Exchange Ltd. (Scrip Code: 12529). Investors and shareholders can use these codes to track the company's stock market activity.