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Nestle India, HUL hit 52-week high; FM Nirmala Sitharaman’s this move helped

Surbhi Jain
Nestle India, HUL

Shares of multinational companies (MNCs) traded higher in Monday’s trading session. The Nifty MNC index gained 2.35 per cent on the National Stock Exchange led by the gains in Nestle India, Hindustan Unilever, Castrol India and Britannia. The government on Saturday announced to abolish the Dividend Distribution Tax (DDT) from the company level, this helped Nestle India and HUL to hit their 52-week high in today’s trade.

Nestle India shares rose as much as 6.28 per cent to hit a 52-week high of Rs 16,500 on NSE, while Hindustan Unilever (HUL) shares surged as high as 5.81 per cent to Rs 2195 on NSE. "When the Dividend distribution Tax was introduced corporates had to bear the extra burden of the tax. So actually it was an additional burden on corporates and the Govt had to face a lot of criticism for it and accordingly the DDT has been proposed to be withdrawn. This gives a lot of relief to corporates and particularly to the MNCs listed in India, who end up declaring a sizeable dividend to their parent company. However, the dividend in the hands of investors will continue to be taxed and there is no relief on that front," SMC Institutional Equities said in a research note.

Currently, companies are required to DDT on the dividend paid to their shareholders at the of 15 per cent plus applicable surcharge and cess in addition to the tax payable by the company on its profits. A dividend is a sum that a company pays its shareholders from profits earned in a particular year. DDT is the tax levied on the payout of that dividend and only domestic companies are liable to pay this tax. "In order to increase the attractiveness of the Indian Equity Market and to provide relief to a large class of investors, I propose to remove the DDT and adopt the classical system of dividend taxation under which the companies would not be required to pay DDT," the Finance Minister said in her Budget speech.