29 March 2011
Dividend Distribution Tax - A domestic company paying dividend will have to pay dividend distribution tax u/s 115-O. The rate applicable for FY 2010-11 is 15% plus surcharge @ 1.125% plus education cess @ 2% plus SAH education cess of 1% of income tax. Total 16.60875%.
Dividend distribution tax is payable within 14 days from date of declaration/distribution/payment of dividend whichever is earlier. The dividend will be tax free at the hands of assessees.
Mutual funds have to pay dividend distribution tax u/s 115R of Income Tax Act. The rate as applicable for financial year 2010-11 is 12.5% on income distributed to any individual or HUF and 20% on income distributed to any other person. In addition, surcharge, education cess @ 2% and SAH education cess @ 1% will be payable. Total is 13.840625% in case of individual or HUF unit holder and 22.145% in other cases.
In case of money market mutual fund or a liquid fund, rate is 25%. Including surcharge and education cess, it is 27.68125%.
The dividend will be tax free at the hands of assessees.
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