The Securities and Exchange Board of India (Sebi) has told exchanges to guard against violations of the listing agreement by companies rushing to declare dividends in order to skirt the distribution tax. In the Union Budget, finance minister Jaswant Singh has proposed to make dividends tax free in the hands of the investors but companies will have to pay a 12.5 per cent distribution tax. Companies are expected to declare dividends in order to beat the March 31 deadline, after which the tax becomes applicable.
Under Clause 16 of the listing agreement with the exchanges, companies will have to give a 21-day notice period for the announcement of a record date for declaring dividends. The communication from the markets watchdog has, however, been purely informal, sources said. Last year
