Dividend distribution tax

DDT shall be computed on the amount determined after grossing up dividend paid by the rate of tax (excluding Surcharge and Cess) on such dividend.

Grossing up needs to be done only of the Basic Rate and not of the Effective Rate. The rates of DDT are as below:

Basic Rate  17.647 

Effective Rate  20.358 (ie 17.647+12% surcharge+3%cess)

1. Does it mean that a companyhas to pay tax twice first corporate tax on total net profit and then      divident tax on the amount declared as dividend?

2. The amount available for dividend will be after tax?

For example

Net Profit Before Tax                                        100 lacs

Corporate tax say 30%                                       30

                                                 PAT                 70 lace

proposed dividend                                              10 lacs

Dividend tax say @ 17%                                      1.70

Amount available for distribution to shareholders   8.30 Lacs

Is my understanding correct? 

Regards,

P.C. Joshi

agreed with

Refer WIRC Reference manual 2015-16 page no. 3.68 which they say on 20000 dividend to be distributed actuall you have to dedcut tax of Rs4285.85/- which is not matching above formula..

But the Basic rate mentioned in the Act is 15% , can u please give the reference how you got 17.647%

dividend 100

tax         15

net         85

rate 15/85=17.647

our company dividend distributed for Rs.85,42,443/- . Please send to us the DDT .

Thanks

Sridhar R

Mr Sridhar,

The DDT on Rs.8542443 dividend, would be Rs.1739071/- As per Sec 115O  sub section 3 (a) the DDT should be paid within 14 days of declaration or payment of dividend whichever is earlier.

What is the rate for DDT for AY 2016-17 having income below 1Crore

is surcharge applicable to companies having income less than 1cRORE