No investor would welcome the proposed 10% tax on dividend income in excess of Rs 10 lakh in the hands of the receiver, but the market has begun to sniff a silver lining in it.
Experts predict a flood of dividend announcements this month to beat the additional tax announced by finance minister Arun Jaitley, which would kick in from April 1.
This could generate short-term buying interest as yields have become attractive with falling stock prices.
There could be a rush of interim dividend announcement similar to what happened in March 2007 after the presentation of the 2007-08 Budget when then finance minister P Chidambaram proposed an increase in dividend distribution tax ( DDT) to 15% from 12.5%. A record 280 companies listed on the BSE announced their plans to pay interim dividends before the next financial year, compared with only 35 companies in 2008 and 32 firms in 2006.