Deemed Dividend & Cash paymnet >10000
This query is : Resolved
28 August 2020
Dear Experts,
1. Deemed Dividend u/s 2(22)(e) is fully exempted u/s 10(34) or 10,00,000 is exempt u/s 10(34) & balance after 10,00,000 Chargable u/s 115BBDA?
2. A partner drawn >10,000 from petty cash in a day. Whther Sec 40A(3) is applicable to partner drawings ? my View is Sec 40A(3) is related to expenses of the organisation so in my question, drawings are not all a expenses so it is allowed u/s 40A(3).
1. Deemed Dividend u/s 2(22)(e) is fully exempted u/s 10(34) or 10,00,000 is exempt u/s 10(34) & balance after 10,00,000 Chargable u/s 115BBDA?
2. A partner drawn >10,000 from petty cash in a day. Whther Sec 40A(3) is applicable to partner drawings ? my View is Sec 40A(3) is related to expenses of the organisation so in my question, drawings are not all a expenses so it is allowed u/s 40A(3).
28 August 2020
Partners' drawings not subjected to s.40A(3). This section applies to expenditure / purchase which are charged to profit and loss account .
28 August 2020
Thanks for your clarification.
What is about 1st question?
What is about 1st question?
20 July 2024
Under Section 2(22)(e) of the Income Tax Act, deemed dividend is treated as income in the hands of the recipient shareholder. Here's how the exemption and taxation work:
1. **Exemption under Section 10(34):**
- Section 10(34) provides exemption from tax on dividends received by shareholders from domestic companies. However, this exemption does not apply to deemed dividends under Section 2(22)(e).
- Deemed dividends under Section 2(22)(e) are not covered under Section 10(34). Therefore, they are taxable in the hands of the recipient shareholder.
2. **Taxation of Deemed Dividend:**
- Deemed dividend under Section 2(22)(e) is taxable in the hands of the recipient shareholder as per their income tax slab rates.
- Additionally, Section 115BBDA of the Income Tax Act applies specifically to dividends declared, distributed, or paid by a domestic company and received by a shareholder, exceeding Rs. 10 lakh in aggregate during the financial year.
- Under Section 115BBDA:
- Dividends exceeding Rs. 10 lakh in aggregate are subject to tax at a flat rate of 10%, irrespective of the income tax slab rate applicable to the shareholder.
- This provision aims to tax high-income recipients of dividend income more effectively.
### Clarification:
- **Exemption under Section 10(34):** Deemed dividends under Section 2(22)(e) do not qualify for exemption under Section 10(34). Hence, they are fully taxable in the hands of the recipient shareholder.
- **Taxation under Section 115BBDA:**
- Deemed dividends are subject to tax as per the recipient's income tax slab rates.
- If the aggregate deemed dividend exceeds Rs. 10 lakh in a financial year, the amount exceeding Rs. 10 lakh is additionally taxed at 10% under Section 115BBDA.
Therefore, deemed dividends under Section 2(22)(e) are fully taxable in the hands of the recipient shareholder, and if they exceed Rs. 10 lakh in aggregate, the excess amount is subject to an additional tax under Section 115BBDA at the rate of 10%.
1. **Exemption under Section 10(34):**
- Section 10(34) provides exemption from tax on dividends received by shareholders from domestic companies. However, this exemption does not apply to deemed dividends under Section 2(22)(e).
- Deemed dividends under Section 2(22)(e) are not covered under Section 10(34). Therefore, they are taxable in the hands of the recipient shareholder.
2. **Taxation of Deemed Dividend:**
- Deemed dividend under Section 2(22)(e) is taxable in the hands of the recipient shareholder as per their income tax slab rates.
- Additionally, Section 115BBDA of the Income Tax Act applies specifically to dividends declared, distributed, or paid by a domestic company and received by a shareholder, exceeding Rs. 10 lakh in aggregate during the financial year.
- Under Section 115BBDA:
- Dividends exceeding Rs. 10 lakh in aggregate are subject to tax at a flat rate of 10%, irrespective of the income tax slab rate applicable to the shareholder.
- This provision aims to tax high-income recipients of dividend income more effectively.
### Clarification:
- **Exemption under Section 10(34):** Deemed dividends under Section 2(22)(e) do not qualify for exemption under Section 10(34). Hence, they are fully taxable in the hands of the recipient shareholder.
- **Taxation under Section 115BBDA:**
- Deemed dividends are subject to tax as per the recipient's income tax slab rates.
- If the aggregate deemed dividend exceeds Rs. 10 lakh in a financial year, the amount exceeding Rs. 10 lakh is additionally taxed at 10% under Section 115BBDA.
Therefore, deemed dividends under Section 2(22)(e) are fully taxable in the hands of the recipient shareholder, and if they exceed Rs. 10 lakh in aggregate, the excess amount is subject to an additional tax under Section 115BBDA at the rate of 10%.
20 July 2024
The company is required to deduct income tax at source (TDS) u/s 194.
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