SKF India, Abbott India, Britannia Industries, Castrol India, Kansai Nerolac Paints, Ambuja Cements, 3M India and Hexware Technologies from the Nifty MNC index were up in the range of 3 per cent to 5 per cent on the NSE.
At 11:07 am, Nifty MNC index, top gainer among thematic indices, was up 2.2 per cent at 13,929 points, as compared to 0.58 per cent rise in the benchmark Nifty 50 index.
“This is a welcome move and comes as a huge relief to the foreign investor community who are often faced with the difficulty of not being able to claim tax credit in the country of residence or take benefit of withholding tax rates under the applicable tax treaty,” Nishith Desai Associates said in India Budget Analysis 2020-21.
While this creates significant benefits for foreign shareholders (including corporates and private equity investors), the trade-off is that for domestic shareholders, the taxes paid on amounts received as dividend may increase, depending on the tax rates applicable for such shareholders, it added.
For MNC companies, the foreign promoters in tax-free locations benefit from no dividend tax.
“With dividend now being taxed in the hands of the receiver could have implications for dividend and buyback policy,” analysts at ICICI Securities said in a note.