Govt okays electronic transfer of dividend

NEW DELHI: Companies will soon be able to transfer dividends directly to the bank accounts of their shareholders. The government has decided to allow companies to pay dividends to their shareholders electronically.
At present, companies distribute dividends to investors by mailing cheques. The decision has been taken to bring greater efficiency and accountability to the process of dividend distribution.
At present, several investors very frequently fail to receive their dividend payments as cheques are lost in transit. In case of changes in addresses as well, investors lose returns on their investments. Electronic transfers of dividends will, however, serve another major purpose of checking tax evasion, say experts.
By maintaining several accounts for receiving dividend payments, it is possible to evade income tax, at present, which can be checked if payments are made directly into shareholder accounts.
The department of company affairs (DCA) has already set up a committee to recommend guidelines for crediting of dividends directly to investors’ accounts. The move comes close on the heels of an in-principle decision by the DCA to allow companies to hold board meetings via the electronic media. The proposal that requires an amendment to the Companies Act, is, however, yet to be approved by the Union Cabinet.
It is not yet clear, whether the new proposal on dividend payments will also require an amendment to the Act.
The first meeting of the committee was to be held on Friday but had to be cancelled. The DCA has appointed heads of several major companies on the committee.