Many companies are rushing to hold board meetings, declare and pay dividends before March 31 to escape the proposed tax of 10 per cent on dividend income exceeding ₹10 lakh a year in the budget. Around 50 BSE-500 companies have already announced dividend in the first week of March this year. Apart from the BSE-500 companies, 26 smallercompanies have also already called board meetings to declare dividends. In comparison, only 10 companies declared dividends in March last year. Most companies typically pay the final dividend of a financial year in April and May.
Arun Jaitely, the Union Minter of Finance, proposed to tax individuals, HUFs and firms receiving dividend in excess of ₹10 lakh per annum in the budget. The 10 per cent tax on the gross amount is in addition to the Dividend Distribution Tax (DDT) already paid by the companies. The new tax will apply from FY16-17 and it is likely to hit big investors and promoters who will have to shell out 10 per cent of their dividend income as tax. Assuming that the companies declare the same dividend as last financial year, promoters of companies alone will have to shell out ₹827 crore as tax on the dividends.
We have listed 14 companies with trailing high dividend yield in the table below. Considering their dividend records and the rise in profitability, it is possible that the dividend yields can further move upward. Compared with the previous financial year, these companies have witnessed rise in net profits in the last four quarters. They also have enough cash to push for higher dividend this time and save taxes as well.
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