Dividend Tax

Prepared by :

Om gupta

Neeraj bhandari

Kaushal adhikari

Dividend - introduction

• A dividend is a return given by a company to its shareholders out of profits made by it during a particular year.

• They are usually given in proportion to the number of shares owned.

• Dividends can be issued in various forms, such as cash payment, stocks or any other form.

Dividend Taxation

• A dividend tax is the tax imposed by a tax authority on dividends received by shareholders (stockholders) of a company.

• A dividend paid by a company is not an expense of the company, but is income of the shareholder.

• Dividends received from a domestic company is already taxed under dividend distribution tax, dividends received are not taxable in hands of shareholders.

Dividend tax rate

• a dividend distribution tax of 15% plus applicable surcharge and cess is applicable on the amount of dividend declared.

• The surcharge applicable on dividend distribution tax is 10% and education cess is applicable at 3%.

• From 2016, the investors earning dividends above 10 lakhs per annum will have to pay an additional tax of 10%.

Dividend tax rate - historyYEARS Tax at the hands of Shareholders receiving the Dividend

Till Year 1996 Taxable at applicable rates

Years 1997 to 2001 Nil

Year 2002 Taxable at applicable rates

Years 2003 to 2015 Nil

Year 2016Dividend above Rs. 10 lakhs for certain type/category of assesses taxed at flat rate of 15%

Dividend tax calculation

Example :

•Say your company pays a dividend on your share of Rs. 100.

•Dividend tax is 15%

•The company itself has to pay this tax.

•So government makes a saying the effective benefit to the tax payer is not Rs. 15 ( 100 * 15%).

Basis of charge

• Dividends once taxed, cannot be taxed a second time.

• The responsibility for paying the tax lies with the company and the principal officer.

• The principal officer of the company is liable to pay dividend distribution tax to the credit of the

Central Government within 14 days from the date of:

• Declaration of any dividend; or

• Distribution of any dividend; or

• Payment of any dividend, whichever is earliest.

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