Dividend distribution tax - which assessment year?

Assessment year will be AY 2016-17 as it is releveant to that year. Dividedn was proposed/ declared in FY 2015-16 related to AY 2016-17 so tax to be paid for AY 2016-17.

Regards,

CA Akshay Shah

Any clarification or notification from IT dept?

It is general practice following for clients.

If it is interim dividend then it is fine to pay with year in which it is paid but final dividend DDT has to pay with AY which it relates to.

But in which year's tax audit will it be mentioned? I think next years audit report.

Say a company declares dividend in AGM held on 30th September 16 and pays tax in 1st week of October 16. In this case, Tax audit report needs to be filed before 30th September 16, by which date the dividend tax is not paid. So, I believe dividend payment as well as tax thereon will appear in the 3CD report of next year i.e. A.Y. 2017-2018. So, assessment year should also be mentioned as 2017-2018 and not 2016-2017.

Reporting is another thing but for payment you should take assessment year to which it relates.

115-O. Tax on distributed profits of domestic companies.

(1) Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of fifteen per cent.

Section 115O(1) clearly states that DDT becames payable on either declration or distribution or payment of dividend... So Declration, Distribution or Payment is the taxable event which triggers the tax libility.. Proposal of dividend by board requires no tax payment....

While filing the return for a year you need to consider the dividends declared, distributed or paid during that year...

In your case, since none of these event has happended during the PY 2015-16, no tax is payable for PY 2015-16 (AY 2016-17)

Though declration and payment both events has happened in PY 2016-17 hence tax is payable for PY 2016-17 (AY 2017-18)

What wold be the tax rate of dividend in case it was increased in Feb 16 budget to say 20% as compared to 15%. If you say 15%, then we have to take AY 16-17. If you say 20%, then we have to take AY 17-18.

No it has to be based on year in whih it is declerd/ paid ie FY 2016-17 being augest 16, so the assesmnt year should be selcted as 2017-18