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Unit 11: Computation of Taxable Income of Companies

The sum of ` one crore, is not dividend for the purpose of Chapter XII D as it is expressly Notes
excluded from the scope of dividend for the purpose of the entire chapter. Therefore, the amount
of loan granted to Mr. A, may be deemed dividend under clause (e) of sub section (22) of section
2 but it is not dividend for the purpose of Chapter XII D. Therefore, the company will not be
liable to additional tax on this sum. The shareholder Mr. A, may be liable to tax by deeming such
sum as dividend u/s 2 (22) (e), unless, he is able to bring it in some exempted category specified
in section 2 (22) or if it can be established that the shares are eligible only for a fixed rate of
dividend.

Did u know?
Rate of dividend tax from April 1, 2010:

Dividend Tax – 15%
Surcharge – 1.125%
Education cess- 0.3225%
SHEC- 0.16125%

Total dividend Tax: 16.60875%
Time limit for payment of DDT is that it is to be paid within 14 days of Declaration Distribution
or Payment of dividend whichever is earlier. Dividend income is exempt under section 10(34) in
the hands of recipient. But dividend tax is not a deductible expense in the hands of company.

Self Assessment

State whether the following statements are true or false:
12. The treatment of tax on distributed profits of domestic companies is dealt in by Chapter
XIID which contains a special provision relating to tax on distributed profits of domestic
companies.

13. Section 115-Q provides for interest payable for non-payment or delayed payment of
additional tax by domestic companies.
14. The dividend received by Assessee Company from its subsidiary shall be deducted provided
Subsidiary has paid dividend tax.
15. Time limit for payment of DDT is that it is to be paid within 16 days of Declaration
Distribution or Payment of dividend whichever is earlier.

16. Dividend income is exempt under section 10(34) in the hands of recipient.

11.4 Tax on Dividend and Income Received from Venture Capital
Companies

Venture Capital is a term coined for the capital required by an entrepreneur to ‘venture’ into
something new, promising and unconventional. Investing in a budding company has always
been a risky proportion for any financier. The risk of the business failure and the apprehensions
of an altogether new project clicking weighed down the small entrepreneurs to get the start-up
fund. The Venture Capitalists or the angel investors then came to the forefront with an appetite
for risk and willingness to fund the ventures.

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