Nine companies have moved already to announce interim dividends for the current financial year to avoid the dividend distribution tax.
The companies that have announced interim dividends on a contingent basis are Gujarat Ambuja Exports, Shipping Corporation of India, Coromandel Fertilisers, Coramandel Investments, the state-owned MMTC and Indian Railway Construction Corporation, Honda Siel, Assam Petro, Videocon Appliances and Videocon International.
These companies will save Rs 20.27 crore (Rs 202.7 million) in tax by paying dividends before March 31, 2003.
Shipping Corporation of India will save Rs 12.67 crore (Rs 126.7 million), Indian Railway Construction Corporation Rs 2.22 crore (Rs 22 million), Coromandel
Fertilisers Rs 1.75 crore (Rs 17 million), Coromandal Investment Rs 1.08 crore (Rs 11 million), MMTC Rs 1.28 crore (Rs 13 million) and Honda Siel Rs 1.04 crore (Rs 10 million).
"We have declared an interim dividend because of the provisions in the Finance Bill. From April 1, dividend tax will have to be paid by companies and not shareholders. By declaring a dividend now, we will not face this liability," a Shipping Corporation of India executive said.
"If we beat the deadline, the company can save about Rs 1.25 crore (Rs 12 million)," an MMTC executive added. A senior MMTC official told Business Standard: "The only two shareholders in MMTC are the President of India and Life Insurance Corporation, and both are exempt from tax.
"In the case of private companies, the question of protecting the promoters becomes important, but not for us.
"If we beat the deadline, the company can save about Rs 1.25 crore (Rs 12 million) and this will not be at the cost of the shareholders."
Under Clause 16 of the listing agreement between companies and stock exchanges, companies have to notify the bourses 21 days in advance plans for announcing dividends. Today was the last date for such announcements this financial year.
Last year, corporate India rushed to hold board meetings to declare interim dividends before March 31 to save investors and promoters from paying the tax on dividend income.
Immediately after the Budget for 2002-03 was presented, the finance ministry had directed the Securities and Exchange Board of India not to allow the bourses to relax the notice period set out in Clause 16.
Sebi, in turn, put the onus on the stock exchanges to ensure that companies did not declare dividends in violation of the listing agreement.
While nine companies have proposed to pay an interim dividend before March 31 this year, two companies from the TVS group, TVS Motor and Sundaram Clayton, have proposed to pay dividend on or after April 1, 2003.
Of the nine companies, three companies have already announced interim dividends for 2002-2003. Indian Railway Construction Corporation, which paid a dividend of 350 per cent in 2001-2002, has proposed to pay an interim dividend of 300 per cent in 2002-03.
Shipping Corporation has proposed an interim dividend of 30 per cent while Gujarat Ambuja Exports has proposed an interim dividend of 6 per cent.
Three companies in the list paid interim dividends in 2001-2002 as well. MMTC had proposed a 121 per cent special interim dividend in July 2002, Coromandel paid 25 per cent and Honda Siel had paid an interim dividend of 40 per cent in 2001-2002.
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