Amendment to [ Section-115-O & 115-Q ] w.e.f. Assessment Year 2019-2020 under Income Tax Act.
At present dividend distributed by a domestic company is subject to the following provisions-
Tax treatment of dividend [not being deemed dividend under section 2(22)(e)]
Tax treatment of deemed
dividend [which is covered by section 2(22)(e)]
1. Declaration, distribution
or payment of dividend by
a domestic company
Domestic company (which declares, distributes or pays dividend) is subject to dividend tax under section 115-O
[dividend tax: 15/85 of amount distributed (+ SC + EC)]
Dividend distribution tax under section 115-O not applicable
2. Dividend in the hands of shareholders of a domestic company
• Aggregate dividend (from all domestic companies received by a shareholder) up to Rs. 10 lakh - Exempt from tax under section 10(34) Aggregate dividend exceeding Rs. 10 lakh - Amount in excess of Rs. 10 lakh is taxable in the hands of shareholder under section 115BBDA [ rate of tax: 10% (+ SC + EC)]
Taxable in the hands of recipient under Section 56 under the head “Income from other sources”
• Amendment - Sections 115-O and 115Q have been amended with effect from April 1, 2018. After this amendment, loan or advance given by a company (on or after April 1, 2018) which is deemed as dividend under section 2(22)(e) will be subject to the following provisions —
On such deemed dividend, the company which gives loan or advance will have to pay dividend tax under section 115-O at the rate of 30% (without grossing up) [+ 12% of such tax as surcharge + 4% of tax and surcharge as health and education cess, effective rate: 34.944 %.
Such deemed dividend will be exempt in the hands of recipient by virtue of section 10(34)
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