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Deduction of Tax (TDS) from Deemed Dividends [Section 194]

The Provisions of Section-194 regarding Deduction Of Tax From Deemed Dividend are given below---

Who is the taxpayer

Domestic Company

Who is the recipient

Resident Shareholders

Payment covered

Deemed Dividend u/s 2(22)(e) upto 31st. March 2018

At what time tax has to be deducted at source

At the time of payment

Maximum amount which can be paid without Tax Deduction


Rate of tax deducted at source


When the provisions are not applicable

Dividend covered by Section 115-O

Who is liable to deduct TDS under Section 194 :

The principal officer of an Indian Company or a company which has made the prescribed arrangements for the declaration and payment of dividend (including dividend or preference shares) within India.

When TDS under Section 194 is to be Deducted:

TDS is required to be deducted before making any payments in cash or before issuing any cheque or warrant in respect of any dividend or before making any distribution or payment to a shareholder, who is resident of India if any dividend is within the meaning of sub-clause (a) or (b) or (c) or (d) or (e) of clause 22 of section 2. W.e.f. 1.4.2003, the provisions of section 194 are applicable only if the dividend is covered under section 2(22)(e) as dividends covered under section 2(22)(a) or (b) or (c) or (d) are exempt in the hands of the shareholders.

CONTENT-Tax Deducted at Source (TDS) [Section 190 to 206CA]

Related Topics....TDS (Tax Deducted at Source)

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