dividend distribution tax

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Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2010 what is the treatment for dividend distribution tax?? whether it is an allowable exps or not??and what is the rate for it??

Aditya Maheshwari

Aditya Maheshwari (Expert)
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21 September 2010 It is not allowable.

rate DDT 15% + sur 7.5% + EC 3% = 16.60875%

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Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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21 September 2010 SECTION 115-O : TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES

The provisions of this Section applies to a domestic company on an amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after 1.4.2003.

The Company is required to pay the Dividend Distribution Tax within 14 days from the date of declaration or distribution or payment of any dividend whichever is earlier.

The said dividend distribution tax is in addition to the income tax chargeable on the total income of the Company and the same shall be payable @15% and the same shall be increased by Surcharge @10%,(@ 7.5 % FOR ASSESSMENT YEAR 2011-12) and such aggregate of tax and surcharge shall be further increased by an education cess @2% and higher education cess @1% .

For the purpose of levying dividend distribution tax following amounts shall be reduced from the Dividend so distributed :

W.e.f. 1.4.2008 where the domestic company has received any dividend from its subsidiary company (where its share holding is more than 50% of its nominal capital), and if such subsidiary has paid dividend distribution tax on dividend declared by it, then the amount of such dividend shall be reduced from the amount of dividend liable to tax, provided the domestic company itself is not a subsidiary of any other company, further provided that the same amount of dividend shall not be taken into account for deduction more than once.

W.e.f. 1-4-2009 where the domestic company has paid the amount of dividend to any person for and on behalf of, the New Pension System Trust established on the 27th day of February, 2008 under the provisions of the Indian Trusts Act, 1882.

The expression ‘dividend’ shall have the same meaning as is given in clause (22) of Section 2, except sub-clause (e) of clause (22) of Section 2.

The Section applies to dividend payments made either out of current or accumulated profits.

The dividend so paid will be eligible for exemption for the shareholders under Section 10(34).

The Dividend Distribution Tax is payable by a Domestic Company even if no income-tax is payable on its total income.

The aforesaid tax will be treated as the final payment of the tax in respect of the amount declared, distributed or paid as dividends and no further credit shall be claimed by the company or by any other person in respect of the amount so paid.

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Querist : Anonymous

Querist : Anonymous (Querist)

21 September 2010 thanks....