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    Budget 2020: Find out what impact removal of DDT could have on market

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    Budget 2020: Find out what impact removal of DDT could have on market

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    Removal of the dividend distribution tax (DDT) has been a longstanding demand and it has been answered by union finance minister Nirmala Sitharaman in the union budget. However, with a twist.

    Removal of the dividend distribution tax (DDT) has been a longstanding demand and it has been answered by union finance minister Nirmala Sitharaman in the union budget. However, with a twist. CNBC-TV18’s Nimesh Shah explains the impact.
    It's good news, it was expected and the finance minister has delivered on removal on the DDT. So, it will not be at the hands of the companies but now the individuals will have to pay the dividend that they get.
    The dividend outgo will go off for a lot of investors in the 20-30 percent slab. So that is a bit of a negative from investors’ point of view but from companies’ point of view, it's quite good as now they will be liberal in announcing the dividends.
    If one looks at some high dividend-paying companies across three buckets, the first bucket is the high dividend-paying public sector undertakings (PSU) companies. Those include names like Coal India, Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation Ltd, Indian Oil Corporation, Petronet LNG and NTPC. These companies will pay a large dividend before March 31, 2020. So, they are the ones to watch out for.
    The second position is the large multinational companies (MNCs), which pay the dividend. For them, it's even more beneficial because they can now take input credit in their home country. So, now they will be more encouraged to pay out a large dividend from the Indian subsidiaries. This included names like Hindustan Unilever Ltd, Castrol India, Cummins, Colgate Palmolive (India) and Nestle India.
    The third basket is the high dividend-paying large companies in the information technology space and other names. There are names like Tata Consultancy Services, Page Industries, Infosys, United Phosphorous, ITC and Hero Honda. So, these are all companies one should watch out for as they are the high dividend-paying companies and they will announce high dividends.
    However, on the flip side, it's slightly negative for individual investors as they have to pay higher dividend depending upon the tax that they are in. So, it's good for companies but little bad news from retail investors' point of view.
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