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Corporate Tax Planning

Notes

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 statement is 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 profi ts 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.

5.4 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 all together 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.
At present, the Venture Capital activity in India comes under the purview of different sets of
regulations namely:
1. The SEBI (Venture Capital Funds) Regulation, 1996 [Regulations] lays down the overall
regulatory framework for registration and operations of venture capital funds in India.
2. Overseas venture capital investments are subject to the Government of India Guidelines
for Overseas Venture Capital Investment in India dated September 20, 1995.
3. For tax exemptions purposes venture capital funds also needs to comply with the Income
Tax Rules made under Section 10(23FA) of the Income Tax Act.
In addition to the above, offshore funds also require FIPB/RBI approval for investment in
domestic funds as well as in Venture Capital Undertakings (VCU). Domestic funds with offshore

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