Sunday, October 2, 2011

Divident Distribution Tax - Section 115O – AY2012-13

Dividend is taxable in India under section 115O of the Income tax Act, 1961. Effective rate of Dividend Distribution tax from 1st April 2011 is 16.2225% (15% basic rate + 5% surcharge + 2% education cess and 1% higher education cess). This tax cannot be avoided on payment of dividend, even if no income tax is payable by the company on its total income.

This dividend distribution tax (DDT) should be paid within 14 days of declaration of dividend or distribution of dividend or payment of dividend whichever is earlier.

For remittance of dividend abroad (overseas), If dividend tax is paid before distribution of dividend, authorised dealers (banks) do not insist for Form 15CA & 15CB

If in case dividend is paid to your group company (headquarters) abroad (this will happen mostly in case of MNC’s) filing of annual income tax returns is mandatory for such companies. As a first step those companies should apply for and obtain PAN number.

11 comments:

  1. Is there any circular that bank shouldnot insist in Form 15CA & 15CB. or it is a mere opinion

    ReplyDelete
    Replies
    1. Section 195(6)of Income Tax read along with Rule 37BB provides for issuance of 15CA & 15CB. Section 195(6) refers to section 195(1). Apart from other provisions, Provision of section 195(1) reads as below :

      "Provided further no such deduction shall be made in respect of any dividends referered to in section 115O)"

      Meaning there is no Tax deduction at source for dividend.

      But since dividend is paid out to an overseas person banks insist that to prove that it is a dividend transaction dividend tax paid challan, if we do not provide that to be on safer side they insist on 15CA / 15CB

      Delete
  2. Hello Sir,

    Is section 115 O applicable in case of following :

    Dividend declared, distributed or paid during previous year 2011 - 12 by a developer / enterprise out of income from special economic zone?

    Please help.

    ReplyDelete
    Replies
    1. Sub Section (6) of section 115O provides the following

      "Notwithstanding anything contained in this section, no tax on distributed profits shall be chargeable in respect of the total income of an undertaking or enterprise engaged in developing or developing and operating or developing, operating and maintaining a Special Economic Zone for any assessment year on any amount declared, distributed or paid by such Developer or enterprise, by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2005 out of its current income either in the hands of the Developer or enterprise or the person receiving such dividend"

      Delete
  3. Explanation to sec 10(34) clarifies that dividends referred to in section 115-o shall not be included in total income of the assessee, being a developer or entepreneur. So far dividend distributed or paid by an SEZ developer or Enterprise was exempt from DDT u/s 115-o and such dividend was exempt in the hands of recipient. Further , dividend was not included in the total income of SEZ developer. A clause contrary to the above has been introduced stating to remove DDT exemption for dividends declared, distributed or paid on or after 1-6-2011. However such income would be exempt in the. Hands of

    ReplyDelete
  4. Sir, i have a doubt. Every companies are paying income tax on their profit or at least MAT. Dividend is payable out of such profit. Even though we have to pay DDT on such profit. Is there a double taxation effect? In same case of a partnership firm, the profits are non taxable. What is the reason behind it?

    ReplyDelete
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  6. Hello,.
    I would like to know Tax Payable on dividend payable to Foreign company in case of joint venture company.
    If the foreign company is holding 50% shares on indian company.

    ReplyDelete
  7. Hi,

    I would have see your article. Thanks a lot.

    ReplyDelete