23 July 2008
Tax at source is not required to be deducted on the dividend declared, distributed or paid by a company. In such a case, dividend distribution tax of 15% is payable by the company u/s 115O. However, tax at source is required to be deducted u/s 194 on the deemed dividends. Deemed dividend u/s 2(22)(e) has been defined and as per the said section the amount of advance to any director or shareholder can be treated as deemed dividend if the company is having accumulated profits available for distribution of dividends to the tune of advances. In that case the amount will be taxable in the hands of director/shareholder u/s 56 of the Income Tax Act. Also, the company will have to deduct Tax at Source u/s 194.
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