The
additional 10% tax on dividend income announced in the Budget would not pinch
many wealthy promoter groups after all. Promoters of several blue chips hold
only a small stake in their individual capacity , through HUFs (Hindu undivided
families) and partnership firms controlled by them, which come under
the new tax.
For
instance, 17.39% of promoter stake in IT major Wipro is owned by the Azim
Premji trust. The company has paid a dividend of Rs 12 per share so far in
2015-16, earning the trust about Rs 516 crore in dividend income.
Trusts
and holding companies would not attract the proposed additional tax on
dividend, experts said. If Wipro maintains the payout at the same level in
2016-17, the dividend that the trust receives would still remain tax-free.
Similarly
, about 43% of promoter holding in Adani Ports and Special Economic Zone is
also held in a family trust. An employee welfare fund and trusts own 14.17% in
automobiles major Mahindra & Mahindra (M&M). This is more than half of
the promoter holding in M&M.
Tata
Sons, which is the holding company of most listed companies in the Tata Group,
would be exempt from the new tax on dividend, the experts said.
Tata Sons has earned nearly Rs 2,382 crore in dividend from IT behemoth Tata
Consultancy Services alone so far in 2015-16. Tata Sons has a 73.26% stake in
TCS.
The
Budget said that “tax at the rate of 10% of gross amount of dividend will be
payable by the recipients, that is, individuals, HUFs and firms receiving
dividend in excess of (Rs) 10 lakh per annum“. K S Ravichandran, founder of
company secretaries firm KSR & Co, said, “Trusts (in companies) have been
created for the purpose of family settlements and would be outside the purview
of the additional dividend tax.“
The
rule is, however, open for interpretation and could result in litigation, tax experts said. For
instance, courts had ruled in the past that taxes can be imposed on individuals
in trusts where the share of the beneficiaries is fixed, experts said.
The
government has not removed or reduced the dividend distribution tax (DDT) borne
by companies paying the dividend, which stands at 20%.
More,
The
additional 10% tax on dividend income announced in the Budget would not pinch
many wealthy promoter groups after all. Promoters of several blue chips hold
only a small stake in their individual capacity , through HUFs (Hindu undivided
families) and partnership firms controlled by them, which come under
the new tax.
For
instance, 17.39% of promoter stake in IT major Wipro is owned by the Azim
Premji trust. The company has paid a dividend of Rs 12 per share so far in
2015-16, earning the trust about Rs 516 crore in dividend income.
Trusts
and holding companies would not attract the proposed additional tax on
dividend, experts said. If Wipro maintains the payout at the same level in
2016-17, the dividend that the trust receives would still remain tax-free.
Similarly
, about 43% of promoter holding in Adani Ports and Special Economic Zone is
also held in a family trust. An employee welfare fund and trusts own 14.17% in
automobiles major Mahindra & Mahindra (M&M). This is more than half of
the promoter holding in M&M.
Tata
Sons, which is the holding company of most listed companies in the Tata Group,
would be exempt from the new tax on dividend, the experts said.
Tata Sons has earned nearly Rs 2,382 crore in dividend from IT behemoth Tata
Consultancy Services alone so far in 2015-16. Tata Sons has a 73.26% stake in
TCS.
The
Budget said that “tax at the rate of 10% of gross amount of dividend will be
payable by the recipients, that is, individuals, HUFs and firms receiving
dividend in excess of (Rs) 10 lakh per annum“. K S Ravichandran, founder of
company secretaries firm KSR & Co, said, “Trusts (in companies) have been
created for the purpose of family settlements and would be outside the purview
of the additional dividend tax.“
The
rule is, however, open for interpretation and could result in litigation, tax experts said. For
instance, courts had ruled in the past that taxes can be imposed on individuals
in trusts where the share of the beneficiaries is fixed, experts said.
The
promoter holding in Reliance Industries is held mostly through limited
liability partnerships (LLPs), which experts said would attract the new 10%
levy . “The LLP (limited liability partnership) holding structure has been used
by some promoters. So, they could be impacted by the additional burden,“ said
Rajesh H Gandhi, partner, Deloitte Haskins & Sells LLP . Reliance’s
`Petroleum Trust’ holds 3.84% in the company , which would be exempt from tax.
The
government has not removed or reduced the dividend distribution tax (DDT) borne
by companies paying the dividend, which stands at 20%.
More,
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