19 December 2016
Dividends received by an Indian Company from a specified foreign company (holding of 26 percent or more equity share) are taxable at the lower basic rate of 15 percent (subject to conditions) which, with applicable surcharge and education cess, results in a tax rate of either 15.45, 16.22 or 16.995 percent.
Surcharge in the case of a domestic company receiving dividends from a specified foreign company: If the total income exceeds INR 10,000,000 = 5 percent on income tax If total income exceeds INR 100,000,000 = 10 percent on income tax (Education Cess = Applicable at 3 percent on income tax (inclusive of surcharge, if any)
Dividends declared by an Indian company are tax free for all shareholders. However, the Indian company declaring the dividend is liable to pay dividend distribution tax (DDT) at 20.358 percent) on the dividends paid/declared/distributed. This comprises DDT of 15 percent along with a surcharge of 12 percent and education of 3 percent (inclusive of surcharge). Provisions exist to remove the cascading effect of DDT in a holding company-subsidiary relationship.
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