Promoters of listed private sector companies have taken home Rs 14,000 crore (Rs 140 billion) as tax-free dividends over the last three years. Dividend income was made tax-free in the hands of recipients in 2003-04.
In fact, India Inc has been quite generous in its dividend payout in the last three years. It paid dividends worth Rs 8,194 crore (Rs 81.94 billion) in 2003-04, Rs 9,254 crore (Rs 92.54 billion) in 2004-05, and Rs 12,085 crore (Rs 120.85 billion) in 2005-06.
In percentage terms, the dividend outgo rose from around 23 per cent in 2003-04 to 24.49 per cent in 2005-06.
Collectively, 1,050 listed entities paid dividends of Rs 29,532 crore (Rs 295.32 billion) during the period. Of the total pie, 45.36 per cent went to promoters and the rest to other shareholders.
Mukesh Ambani {Rs 1,482 crore (Rs 14.82 billion) in three years, Azim Premji {Rs 1,438 crore (Rs 14.38 billion)}, Shiv Nadar {Rs 776 crore Rs 7.76 billion)}, and the promoters of Infosys Technologies {Rs 538 crore Rs 5.38 billion)}, Hero Honda {Rs 328 crore (Rs 3.28 billion)}, Ranbaxy, Ashok Leyland, and Bajaj Auto {over Rs 300 crore (Rs 3 billion) each} have been the major beneficiaries of the tax-free dividend regime.
Mukesh Ambani took home Rs 667 crore (Rs 6.67 billion) in 2005-06, Rs 476 crore (Rs 4.76 billion) in 2004-05, and Rs 334 crore (Rs 3.34 billion) in 2003-04. Azim Premji, who controls over 83 per cent stake in Wipro, took home Rs 565 crore (Rs 5.65 billion) in 2003-04, Rs 292 crore (Rs 2.92 billion) in 2004-05, and Rs 581 crore (Rs 5.81 billion) in 2005-06.
Shiv Nadar received Rs 775 crore (Rs 7.75 billion) in three years from his two IT companies - HCL Technologies {Rs 646 crore (Rs 6.46 billion)} and HCL Infosystems {Rs 119 crore (Rs 1.19 billion)}.
Infosys chief mentor Narayana Murthy and his family got over Rs 142 crore (Rs 1.42 billion) as dividends in three years for his six-per-cent stake in the company. Nandan Nilekani, CEO and managing director, received over Rs 100 crore (Rs 1 billion) in three years for his family's stake of over four per cent in the company.
The third largest stakeholder in Infosys, S Gopalakrishnan, received around Rs 100 crore (Rs 1 billion) for his four-per-cent stake. Collectively, 19 promoters of Infosys received dividends of Rs 538 crore (Rs 5.38 billion) in three years. The company's aggregate net profit in this period was to the tune of Rs 5,569 crore (Rs 55.69 billion). It distributed dividends of Rs 2,410 crore (Rs 24.1 billion) at a rate of 43.27 per cent.
The sample of 1,050 companies covers all major dividend-paying private entities. For the financial year 2005-06, close to 900 of these companies have announced dividends. There will not be any major change in the total dividends, as all major companies have already decided on the quantum of payment.
The finance ministry, in 1999-2000, had made dividends tax-free in the hands of recipients. Subsequently, in the 2002-03 Union Budget, the ministry changed the norm, and taxed dividend payers.
In the Union Budget for 2003-04, the finance ministry reverted to the earlier norm of making dividends tax-free in the hands of recipients.
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