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Interim Dividend

Sambhav Sadh (Manager) (21 Points)

29 January 2021

What is Interim Dividend and Final Dividend?

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CA Ruchika (AIR 7) (Co-Founder Koncept Education The BEST Online CA Classes! Visit www.konceptca.com) (83 Points)
Replied 29 January 2021

INTERIM DIVIDEND AND FINAL DIVIDEND?

A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus; it is able to pay a proportion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). The current year profit as well as the retained earnings of previous years is available for distribution; a corporation is usually prohibited from paying a dividend out of its capital.

The dividend received by a shareholder is income of the shareholder and may be subject to income tax (i.e. dividend tax). A dividend is allocated as a fixed amount per share, with shareholders receiving a dividend in proportion to their shareholding. Dividends can provide stable income and raise morale among shareholders.

There are two types of dividend:

Interim Dividend
Final Dividend

Interim Dividend:

An interim dividend is a dividend payment made before a company's annual general meeting (AGM) and the release of final financial statements. This declared dividend usually accompanies the company's interim financial statements. The interim dividend is typically the smaller of the two payments made to shareholders.

When company feels that it has adequate profit with them they declare Interim Dividend. This dividend is declared between Two Annual General Meeting (AGM). This dividend is declared by Board of Directors. And it is declared before the preparation of the financial statements. It can be revoked with the consent of all shareholders. Rate of dividend is less as compared to Final Dividend. It is declared only when the articles specially permits the declaration. It relates to a part of the year i.e. usually six month.

Final Dividend:

Final dividend implies the dividend declared by the board of directors, at the company’s Annual General Meeting, after the close of financial year. This is recommended by board at the board meeting and announced by members of the company at the Annual General Meeting (AGM).

Once the dividend is declared it cannot be revoked. The dividend is declared after the preparation of the financial statements. Rate of dividend is comparatively higher than Interim Dividend. It does not require any specific provision in the articles. Final Dividend is also known as year-end dividend. It relates to the full year.