Shares of HDFC rose as tax experts said the company's dividend income won't attract tax. Explaining the reasons for the same Keki Mistry, VC and CEO of the company said, “Whenever any company pays dividend, including HDFC, we always go by a dividend pay-out ratio. The dividend pay-out ratio is the total of the dividend plus the dividend distribution tax as it used to be in the earlier regime. My sense is that most companies – not all – because DDT is not applicable anymore will probably gross up the dividend and prefer paying slightly higher amount of dividend.”

He further said, For a company like HDFC – we have a lot of associate companies and subsidiaries like HDFC Bank, HDFC Life Insurance Company Ltd, HDFC Asset Management Company, HDFC ERGO and so on and so forth, all these companies pay dividend every year. The dividend that we receive from these companies will not be subject to tax under the new regime provided we give at least that much dividend to our shareholders, which we certainly will do."

Historically, the dividend that we have paid to our shareholders is much more than the dividend that we receive, he said. Therefore, to my mind, the entire dividend that we receive – even though it might be higher – will not be subject to tax because of the higher dividend we pay-out,” he added.

“My off-the-cuff recollection is that the dividend we pay-out is about 2.5-3 times the amount of dividend we receive,” said Mistry.