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Dividend Payout Date

ArchAngel (Corporate Affairs Enthusiast) (118 Points)

25 April 2011

Dear Everybody,

My company is a private limited company. The board of directors issued an interim dividend to its members.

As per my understanding, the dividend tax has to be paid within 15 days after the board decided to issue the dividend.

Now my Questions are

1) Is there any rule about the payout of dividend after the board resolution? Is it fine to pay the dividend even after 2-3 months after the declaration provided the tax was paid within 15 days.

2) Can the divided be issued before paying the dividend tax.

Thanks and Regards,

ArchAngel

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6 Replies

ArchAngel (Corporate Affairs Enthusiast) (118 Points)
Replied 26 April 2011

Can any of you experts please help me on this matter?

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Jaideep (Service) (1368 Points)
Replied 26 April 2011

Hi Angel,

Please refer Section 205 to 207 of the Companies Act, 1956.

First point, Interim Divident includes Divdend.

1) Is there any rule about the payout of dividend after the board resolution? Is it fine to pay the dividend even after 2-3 months after the declaration provided the tax was paid within 15 days.

-> It has to be paid within forty-two days from the date of the declaration.

2) Can the divided be issued before paying the dividend tax.

-> No it can not issued before payment of CDT (Corporate dividend Tax). Your Bankers for the dividend account will demand challan copy of payment of TAX before opening account.

Regards

Jaideep Pandya

ArchAngel (Corporate Affairs Enthusiast) (118 Points)
Replied 26 April 2011

Thanks Jaideep,

We are a private limited company, but we in fact could not send the payout within 42 days to all the members. Anyway we have paid the tax in the very same week of declaring the dividend.

What can we do now? It is not too easy to change the minutes to alter the declaration date.

Can we now just issue a pre-dated cheque to the members ?

Thanks and Regards

ArchAngel.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 26 April 2011

Originally posted by : ArchAngel
	Dear Everybody, My company is a private limited company. The board of directors issued an interim dividend to its members. As per my understanding, the dividend tax has to be paid within 15 days after the board decided to issue the dividend. Now my Questions are 1) Is there any rule about the payout of dividend after the board resolution? Is it fine to pay the dividend even after 2-3 months after the declaration provided the tax was paid within 15 days. 2) Can the divided be issued before paying the dividend tax. Thanks and Regards, ArchAngel

Answer 1

The dividend must be paid withing 30 days of its declaration and after 7 days of the expiry of that 30 days the remaining amount must be transferred to a separate Unpaid Dividend Account.

Answer 2

Yes, the dividend may be paid before the payment of Dividend distribution tax. It may be deposited at a later date but within specified period.

ArchAngel (Corporate Affairs Enthusiast) (118 Points)
Replied 26 April 2011

Dear Ankur Sir,

Thank you for your response.

In our case, we did not pay the money within 30 days to the members. What can we do now?

We create a separate header in our account books says "Unpaid Dividend", then issue the dividend in today's date? [which is actually more than 2 months from the date of issue of dividend.]

Thanks and Regards

ArchAngel

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 26 April 2011

The process should be as under:-

1. Declare Dividend

2. Transfer the amount to a separate Dividend Account opened for the purpose within 5 days of declaration of dividend.

3. Distribute dividend within 30 dyas of the declaration of dividend.

4. The balance remaines in the dividend account after the 30 days must be transferred to unpaid dividend account, (For this the nomenclature of the dividend account is used to be changed as Unpaid Dividend Account) within 7 days of the completion of that 30 days.

5. Deposit Dividend Distribution Tax within 14 days of the declaration of Dividend.

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