The dividends paid by private sector companies during the first three months of 2020 was nearly double that of last year. India Inc paid a cumulative dividend of record Rs 44,810 crore, up nearly 95 per cent over the same period of last year.
Starting April, companies won’t have to pay the dividend distribution tax (DDT) of 20.56 per cent. However, those receiving dividends will have to pay tax on it based on their personal income tax slab. As a result, promoters might end up paying as high as 43 per cent tax on the dividends that they receive.
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The change in the tax structure has prompted companies to advance their payouts.
“What companies would have paid as final dividend has been paid an interim dividend during the March quarter,” said an analyst.
Analysts said the move has helped promoters save billions in taxes. In the previous two financial years, dividend payouts had reduced as more companies opted for the tax-friendlier option of buybacks to reward shareholders.
However, the Centre ended the tax arbitrage last year by levying a 20 per cent tax on buybacks.
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