Page 213 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes 9.3.1 Special Provisions Relating to Tax on Distributed Profi ts of
Domestic Companies

According to Section 115-O the Domestic Company shall, in addition to the income tax chargeable
in respect of its total income, be liable to pay additional income tax on any amount declared,
distributed or paid by such company by way of dividend (whether interim or otherwise),

whether out of current or accumulated profits. Such dividend distribution tax shall be payable
@ 15% plus surcharge @ 5% plus education cess @ 2% plus SHES @ 1% of amount so declared,
distributed or paid.

The amount referred to in Sec. 115-O (1) (as above) i.e. dividend to be distributed shall be reduced
by
1. The amount of dividend, if any, received by the domestic company during the fi nancial
year, if—
(a) such dividend is received from its subsidiary;
(b) the subsidiary has paid tax under this section on such dividend; and
(c) the domestic company is not a subsidiary of any other company.

!
Caution However, it must be noted that the same amount of dividend shall not be taken
into account for reduction more than once.
A company shall be a subsidiary of another company, if such other company, holds more
than 50% of nominal value of equity share capital of the company.

2. The amount of dividend paid to any person for, or on behalf of, the New Pension System
Trust established on the 27th day of February, 2008 under the provisions of the Indian
Trusts Act, 1882.

The holding company should not be a subsidiary of any other company i.e. benefit u/s 115-O (1A)
is available only to the ultimate holding company. But ultimate holding company can claim the

benefit on dividend received from multiple subsidiary companies. Dividend received from other
type of subsidiaries i.e. subsidiaries having Controlling composition of board, sub-subsidiaries,
joint venture, etc. shall not qualify benefi t u/s 115-O(1A). The expression ‘dividend’ shall have
the same meaning as is given in clause (22) of Section 2, but shall not include sub-clause (e) of
clause (22) of Section 2. Dividend u/s 2(22)(e) is not covered by this Chapter and the same shall
be taxable in the hands of the shareholder and the company shall not pay tax on such dividend.

Did u know? Due Date of Tax Payment

The principal officer of the domestic company and the company shall be liable to pay
the tax on the dividend distribution profi t within 14 days from the date of declaration or
distribution or payment of any dividend, whichever is earlier.
The tax on the dividend distribution profit shall be payable whether or not the domestic company

is liable to pay income tax on its total income computed in accordance with the provision of this
Act. The tax on dividend distribution profit shall be treated as the final payment of the tax in

respect of the amount declared, distributed or paid as dividends and no further credit shall be
claimed by the company or by any other person in respect of the amount so paid. The company
or the shareholder shall not be allowed any deduction in respect of the amount which has been
charges to tax or the tax thereon under Sec. 115-O(1).

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