Treatment to dividend per Indian IT laws

This query is : Resolved

Kanishka (Querist)
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11 July 2022 VMware Inc is a US based, NYSE listed listed multinational. It has issued a special dividend to its shareholders. The special dividend is to spin off VMWare from Dell Inc.

VMware currently estimates that, for federal tax purposes, 39.49% of the Special Dividend will be
treated as a taxable dividend, with the other 60.51% of the Special Dividend being first treated as a return on capital to stockholders to the extent of their basis in VMware common stock, and
thereafter as capital gain.

Detailed FAQs are available at https://ir.vmware.com/download/companies/vmware/Presentations/Dividend%20FAQs.pdf

Here is the doubt: A resident Indian taxpayer, holding VMware shares ESOPs, receives INR 100/- as special dividend as described above. Does all INR 100 needs to be treated as dividend income and taxed at slab rate? Or INR 39.49/- and INR 60.51/- are to be treated differently for taxation purpose? If so, exactly how the tax is supposed to be computed?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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12 July 2022 Dividend received from a foreign company is taxable. It will be charged to tax under the head “income from other sources.”

Dividends received from a foreign company will be included in the total income of the taxpayer and will be charged to tax at the rates applicable to the taxpayer.
Rs 100 needs to be treated as dividend.
DTAA relief can be claimed for the tax deducted outside India.