Search the Internet          Tips  Sites: Finance, Investment

Small investors to gain Rs 650 million

Samata Dhawade

Finance Minister Yashwant Sinha's decision to exempt small shareholders drawing dividend income of up to Rs 1,000 annually from the rigours of the tax deducted at source will mean these shareholders get to save a marginal Rs 650 million.

The benefits have been arrived at on the assumption that the small investors are those who together hold an average of 10 per cent of the equity capital of a company.

A look at the average distribution of shareholdings as disclosed by companies in their annual reports reveals that these small shareholders receive dividend of less than Rs 1,000 per annum.

The data has been sourced from the annual reports of the companies and shows that 90 per cent investors in any company hold less than 500 shares. On an aggregate basis, these shareholders account for only 10 per cent of the total equity capital of the company.

The calculations are based on the total dividend payout of 723 companies during 2000-01. These companies paid a total dividend of Rs 65 billion, of which only 10 per cent was distributed among small shareholders.

This means the dividend income of small shareholders stood at Rs 6.50 billion. Of this, 10 per cent of the tax deducted at source meant Rs 650 million.

Thus, the government stands to lose Rs 650 million as TDS, while the small shareholders stand to gain the same amount. Of course, there will be many shareholders with holdings in many companies who come under the regular tax brackets and will be paying tax at the time of filing returns.

Tata Power is a case in point. It has about 158,000 small investors who hold less than 500 equity shares, according to the information in its annual report.

These small investors hold just 11.94 per cent of Tata Power's equity shares. Based on the total dividend payout, the average dividend income of these investors works out to Rs 746.

Similarly, 84 thousand small investors of Tata Tea, who hold 14.2 per cent of the equity capital of the company, get an average dividend income of Rs 852.

Grasim Industries has about 245,000 small investors who hold 8.2 per cent of equity capital, and derive an average dividend income of Rs 244 annually.

Powered by

ALSO READ:
Sinha rolls back cut on tax rebate partially
'Moderate tax regime & too many exemptions go ill together'
Highlights of the Finance Bill 2002
Opposition ridicules govt over rollback
Industry welcomes amendments to Finance Bill
PM okays tax rebate rollback
Rollback may cost Centre Rs 80 billion
Rollback of some Budget proposals likely: BJP
The Rediff Budget Special
The Rediff-Business Standard Special
Money

Tell us what you think of this report