The firms paid dividend of Rs 41,436 crore in 2005-06 on a net profit of Rs 1,46,412 crore. The companies paid dividend distribution tax of Rs 5,826 crore at an effective rate of 14.06% (12.5% surgecharge on 12.50% dividend distribution tax).
The current estimate is based on the nine months net profit of Rs 1,44,726 crore (annualised Rs 192,968 crore) earned in the nine months ended December 31, 2006, and dividend payout of 28.30%.
We have assumed that if dividend-paying companies proposed a dividend payout of 28.30% on an annualised net profit of Rs 1,92,968 crore, the dividend distribution tax on the old rate would have been Rs 7,678 crore.
As the finance minister has proposed dividend distribution tax of 15% (effective rate at 17.25% as they have to pay 15% surcharge on dividend distribution tax of 15%) from 12.5 %, the effective dividend tax would be Rs 9,420 crore - an increase of Rs 1,742 crore.
The companies that would be hit hard from the new proposal would be oil and gas giant ONGC, private sector petrochemicals giant Reliance Industries, oil marketing major Indian Oil Corporation, energy giant NTPC and steel giant Steel Authority of India.
