Government may mop up at least Rs 2,000 crore through proposed dividend tax

MUMBAI: If the proposal to tax dividends above Rs 1 crore at 10% is accepted by the legislature, India's large promoter groups will contribute significant sums to the exchequer. Tata Group will have to shell out over Rs 424 crore, the maximum among other business houses. Vendanta Group will be next in line with a contrinution of Rs 122 crore, whereas Mukesh Ambani led Reliance Group will pay Rs 119 crore considering the dividends they collected in the latest ended financial year.

The total dividend tax collection through this route may exceed Rs 2,000 crore considering the publicly listed companies of over 240 promoter groups who earned more than Rs 1 crore in the latest ended fiscal.

Under the Direct Tax Code, the government plans to propose a 10% tax on dividends above Rs 1 crore. There is no tax on dividends in the hands of investors as present. If accepted, the tax collection through this route will be equivalent to the government's proposed allocation of Rs 2,000 crore towards urban housing fund during the budget and will exceed the fund of Rs 1,000 crore meant for women's safety.

Half of the dividend tax amount or Rs 1,100 crore will be contributed by the top 10 promoter groups. Bharti Airtel Group will have to pay Rs 104.4 crore as dividend tax while Azim Premji led IT behemoth Wipro and Rajiv Bajaj promoted Bajaj Auto group will pay Rs 96.8 crore and Rs 92.8 crore respectively. Aditya Birla group which promotes Hindalco, Grasim, and Ultratech will have to pay over Rs 33 crore.