On Tuesday, shares of Majesco declined as investors chose to sell, rather than be taxed for dividend income.
The stock was down by half a percent a day after the company announced an interim dividend of Rs 974 per share for the financial year 2020-21.
The insurance software exporter said in a stock exchange filing that its board has approved an interim dividend of Rs 974 per share. On the face value of Rs 5, the 19,480% dividend could be one of the highest dividend payouts ever in the history of India's stock market.
The high dividend comes after the sale of its US arm to Thoma Bravo earlier this year.
Collectively, the company will be paying out Rs 2,788 crore as dividend payout to a shareholder base of 28.577 million shares.
The record date for the dividend is 25 December and the ex-dividend date is 23 December. According to the company, the earliest dividend payout will be on 30 December.
While shares of the company hit 5% upper circuit on Monday after the announcement on the high dividend, investors soon realised the burden of dividend income and it is expected that rich investors have cashed out. This is because if shareholders of the company book profits now, their gains will be taxed at 10-15% (as short-term capital gains or long-term capital gains), depending on how long back they bought the shares.
On the other hand, those in a higher tax slab and holding a large number of shares in the company will be taxed as much as 43% due to dividend income.
Starting 1 April 2020, dividend income above Rs 1 lakh in a financial year are taxed at the hands of the receiver, added to their total income and taxed according to per his/her tax slab.