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Ddt u/s. 1150 as per finance act 2015

CS Arjun Rajagopal (B.com, ACS) (1056 Points)

04 March 2016

What is the formula for arriving basic rate of DDT 17.647%? When the Act says DDT is (15% basic rate+ 12%surcharge+3%cess). Also effective rate is 20.358%. How the grossing up is also done? Iam confused!!! I would be grateful if some body can clarify this.

Regards, Arjun Rajagopal

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5 Replies

Sathish M (Management Accountant) (40581 Points)
Replied 04 March 2016

For grossing up purposes, the dividend tax u/s 115-O(1) will be considered ignoring the impact of surcharge and education cess. The formula for grossing up as given in newly inserted section 115-O(1B) is as follows:

Dividend or distribution tax rate before surcharge and education cess = Amount distributed X t / (100 – t)

t = Tax rate given under section 115-O(1).
Amount distributed = Dividend payable – Dividend received from subsidiary company in the same financial year.

In view of the amendments made by inserting the new provisions for grossing up under sub-section (1B) of the Section 115-O of the Act (w.e.f. 1-10-2014), the tax on distributed profits of domestic companies to be levied on the gross amount of dividend and not on net amount of dividend distributed as per the above formula. For example, if ₹ 20,000/- is to be distributed to the share holders, the dividend distribution tax would be –