Abstract

As per Section 115 O of Income Tax Act 1961, Dividend Distribution Tax (DDT) is to be imposed on the dividend, which is distributed by company to their shareholders; it was paid by company. But on 1^st February 2020, in India Union Budget 2020, announced to abolish the Dividend Distribution Tax (DDT). Dividend policy is a strategy used by a company to determine the amount and timing of dividend payments. The dividends policy framed by an organization is one of the crucial issues in corporate finance. It may have an impact on shareholders’ wealth. The study is an attempt to analyze the impact of shareholders’ wealth due to the abolishment of the Dividend Distribution Tax. According to new policy, dividends are to be taxed and are part of the shareholder’s income. In the DDT arrangement, tax was deducted by the company on the dividends given to the shareholders at a constant rate. But because of this new policy, small investors and retirees are getting little amounts as dividends, which end up by paying the tax. The problem has been analyzed by find the relationship between dividend policy and shareholders wealth. The study is based on the data for the period of 6 years from the financial year 2013-2014 to 2018-2019 of 50 companies of the Nifty 50. Statistical analysis has been conducted considering the variables, viz.earning per share and dividend per share