Elecon Engineering : Communication to shareholders as per Reg 30

Dear Shareholder,

Subject: Deduction of tax at source on dividend

We hope that you and your family are doing well and are safe and healthy. Please take care of yourselves.

We wish to inform you that the Board of Directors of your Company ("Board") have at their meeting held on 3rd May, 2022 had recommended dividend of Rs. 1.00/- (i.e. 50%) and additionally Special Dividend of Rs. 0.40/- (i.e. 20%), to mark 70 years of Elecon Brand, which aggregates to Rs. 1.40/- (i.e. 70%) per equity share having face value of Rs. 2/- each for the financial year ended on 31st March, 2022.

The dividend, as recommended by the Board, if approved by the shareholders at the ensuing 62nd Annual General Meeting (AGM), will be paid to those shareholders holding equity shares of the Company as on Record Date.

In terms of the provisions of the Income-tax Act, 1961, ("the Act"), dividend paid or distributed by a Company on or after 1st April, 2020 is taxable in the hands of the shareholders. The Company shall therefore be required to deduct tax at source at the time of payment of dividend. The deduction of tax at source will be based on the category of shareholders and subject to fulfilment of conditions as provided herein below:

• For resident shareholders

Tax will be deducted at source ("TDS") under Section 194 of the Act @ 10% on the amount of dividend payable unless exempt under any of the provisions of the Act. However, in case of individuals, TDS would not apply if the aggregate of total dividend distributed to them by the Company during financial year does not exceed Rs.5,000.

Tax at source will not be deducted in cases where a shareholder provides Form 15G (applicable to individual) / Form 15H (applicable to an individual above the age of 60 years), provided that the eligibility conditions are being met. Blank Form 15G and 15H can be downloaded from the link given at the end of this communication. Please note that all fields mentioned in the Form are mandatory and Company may reject the forms submitted, if it does not fulfil the requirement of law.

Needless to mention, valid Permanent Account Number ("PAN") will be mandatorily required. Shareholders who do not have PAN, TDS would be deducted at higher rates u/s 206AA of the Act.

NIL /lower tax shall be deducted on the dividend payable to following resident shareholders on submission of self-declaration (as per format attached) as listed below:

1. Insurance companies: Declaration (refer format) by shareholder qualifying as Insurer as per Section 2(7A) of the Insurance Act, 1938 along with self-attested copy of PAN card;
2. Mutual Funds: Declaration (refer format) by Mutual Fund shareholder eligible for exemption u/s 10(23D) of the Income- tax Act, 1961 along with self-attested copies of registration documents and PAN card;
3. Alternative Investment Fund (AIF) established in India: Declaration (refer format) that the shareholder is eligible for exemption under Section 10(23FBA) of the Act and they are established as Category I or Category II AIF under the SEBI regulations. Copy of self-attestedregistration documents and PAN card should be provided.
4. New Pension System Trust: Declaration (refer format) along with self-attested copy of documentary evidence supporting the exemption and self-attested copy of PAN card.
5. Other shareholders - Declaration (refer format) along with self-attested copy of documentary evidence supporting the exemption and self-attested copy of PAN card.
6. Shareholders who have provided a valid certificate issued u/s. 197 of the Act for lower / nil rate of deduction or an exemption certificate issued by the income tax authorities along with Declaration (refer format).

• For non-resident shareholders (including Foreign Institutional Investors and Foreign Portfolio Investors)

Tax is required to be withheld in accordance with the provisions of Section 195 and Section 196D of the Act at applicable rates in force. As per the relevant provisions of the Act, the tax shall be withheld @ 20% (plus applicable surcharge and cess) on the amount of dividend payable. In case non-resident shareholders provide a certificate issued under Section 197/195 of the Act, for lower / NIL withholding taxes, rate specified in the said certificate shall be considered, on submission of self-attested copy of the same. However, as per Section 90 of the Act, a non-resident shareholder has the option to be governed by the provisions of the Double Tax Avoidance Agreement ("DTAA") between India and the country of tax residence of the shareholder, if they are more beneficial to the shareholder. For this

purpose, i.e. to avail the tax treaty benefits, the non-resident shareholder will have to provide the following:

1. Self-attestedcopy of PAN card, if any, allotted by the Indian income tax authorities; In case PAN is not available, the non-resident shareholder shall furnish (a) name, (b) e-mail ID, (c) contact number, (d) address in residency country, (e) Tax Identification Number of the residency country (link of format attached);
2. Self-attestedcopy of Tax Residency Certificate ("TRC") obtained from the tax authorities of the country of which the shareholder is resident;
3. Self-declarationin Form 10F (refer format), if all the details required in this form are not mentioned in the TRC;
4. Self-declaration(refer format) by the non-resident shareholder of meeting treaty eligibility requirement and satisfying beneficial ownership requirement (Non-resident having PE in India would need to comply with provisions of Section 206AB of the IT Act).
5. In case of Foreign Institutional Investors and Foreign Portfolio Investors, self-attested copy of SEBI registration certificate.
6. In case of shareholder being tax resident of Singapore, please furnish the letter issued by the competent authority or any other evidences demonstrating the non- applicability of Article 24 - Limitation of Relief under India-Singapore Double Taxation Avoidance Agreement (DTAA).

The self-declarations referred to in point nos. (iii) to (iv) can be downloaded from the link given at the end of this communication

Application of beneficial DTAA rate shall depend upon the completeness and satisfactory review by the Company, of the documents submitted by non- resident shareholders and meeting requirement of Act read with applicable tax treaty. In absence of the same, the Company will not be obligated to apply the beneficial DTAA rates at the time of tax deduction on dividend amounts.

• Section 206AB of the Act

Rate of TDS @10% u/s 194 of the Act is subject to provisions of Section 206AB of Act (effective from 1st July, 2021) which introduces special provisions for TDS in respect of non- filers of income-tax return. As provided in Section 206AB, tax is required to be deducted at higher of following rates in case of payments to specified persons:

• at twice the rate specified in the relevant provision of the Act; or
• at twice the rate or rates in force; or
• at the rate of 5%.

Where Sections 206AA and 206AB are applicable i.e. the specified person has not submitted the PAN as well as not filed the return; the tax shall be deducted at the higher of the two rates prescribed in these two Sections.

The Company will use the mechanism prescribed by Income tax department to verify if a shareholder is a 'specified person' under Section 206AB of the Income Tax Act and basis the result provided, the Company will apply higher rates under Section 206AB of the Income Tax Act on those shareholders who are covered as 'specified person' under Section 206AB of the IT Act.

To enable us to determine the appropriate TDS / withholding tax rate applicable, we request you to provide the above details and documents not later than 5th June, 2022.

To summarise, dividend will be paid after deducting the tax at source as under:

1. NIL for resident shareholders receiving dividend upto Rs.5,000 or in case Form 15G / Form 15H (as applicable) along with self-attested copy of the PAN card linked to Aadhar is submitted.
2. 10% for other resident shareholders in case copy of PAN card is provided/available.
3. NIL / lower withholding tax rate for resident shareholders on submission of self- attested copy of the certificate issued under Section 197 of the Act.
4. 20% for resident shareholders if copy of PAN card is not provided / not available / rate applicable to non-filers of return of income.
5. Tax will be assessed on the basis of documents submitted by the non-resident shareholders.
6. 20% plus applicable surcharge and cess for non-resident shareholders in case the relevant documents are not submitted.
7. Lower/ NIL TDS on submission of self-attested copy of the valid certificate issued under Section 197/195 of the Act.

Aforesaid rates will be subject to applicability of Section 206AB of the Act.