Homefinance News

    Companies rushing to declare dividend post removal of DDT

    Companies rushing to declare dividend post removal of DDT

    Companies rushing to declare dividend post removal of DDT
    Profile image

    By Nupur Jainkunia   IST (Updated)

    Mini

    Post budget 2020 announcement related to obliterate Dividend Distribution Tax (DDT) on dividends and taxable in the hands of recipients, companies have aggressively started announcing dividends.

    Post budget 2020 announcement related to obliterate Dividend Distribution Tax (DDT) on dividends and taxable in the hands of recipients, companies have aggressively started announcing dividends.
    In the last month, over 100 companies have declared dividends either interim or final. Most of these companies have high promoter shareholding. Up to 68 percent of these companies have promoter holding of over 50 percent, 21 percent have between 40-50 percent and balance companies have promoter holding in the range of 20 percent to 40 percent.
    What Has Changed Post Budget 2020?
    Earlier, Indian companies were required to pay DDT at the rate of 15 percent and with cess, the effective tax rate was 20.56 percent. This is over and above the corporate tax that companies pay on their taxable profit.
    Post corporate tax rate cut to 25 percent, the effective tax rate, including DDT, for India Inc worked out to 48.5 percent. The decision was taken to avoid to remove the cascading effect for the dividend received by holding companies from their subsidiary.
    Going ahead, dividend income from shares and mutual funds will be taxed in the hands of the recipient at the applicable income tax slab rates. Also, the tax will be deducted at source i.e. TDS on such dividend incomes will be levied at the rate of 10 percent if it exceeds Rs 5,000 in a financial year.
    Up till now, shareholders were not required to pay any tax on income from dividends from domestic companies for up to Rs 10 lakh while they are taxed 10 percent for dividend income beyond Rs 10 lakh.
    Analysts said it will be neutral for taxpayers in 20 percent tax bracket, while taxpayers in the 30 percent tax bracket will have to suffer more tax as tax rates can go to the levels of 43 percent. It can be one of the reasons why companies are speeding up their dividend announcements.
    Also, the quantum of dividend announced post budget is higher compared to earlier dividends. The below table is just a snapshot of recently announced dividends. In most of the cases, the recently announced dividend is either equal to total year-to-date (YTD) or higher than that of full FY19.
    Company NamePromoter holdingDiv per share (declared  post Feb1)Dividend %Interim/final9M divFY20Div FY19Div yield
    Sanofi India60.40%Rs.3493490%Final + SpecialRs.349Rs.711.00
    Hero Moto34.60%Rs.653250%FinalRs.97Rs.87.04.10
    Bajaj Auto Ltd.53.50%Rs.1201200%InterimRs.120Rs.602.00
    Shree cement62.60%Rs.1101100%InterimRs.110Rs.600.30
    Symphony75.00%Rs.18900%InterimRs.23Rs.4.50.30
    Nestle62.80%Rs.61610%FinalRs.342Rs.1150.70
    Page Industries48.30%Rs.58580%InterimRs.161Rs.3031.40
    Bajaj Finance Ltd.56.20%Rs.10500%InterimRs.10Rs.6.10.10
    HEG59.60%Rs.25250%InterimRs.75Rs.303.20
    As per NSE board meet calendar, around 27 more companies will be announcing dividend before the end of the financial year 2020.
    Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
    arrow down

      Most Read

      Market Movers

      View All
      CompanyPriceChng%Chng