As per Current Provision for Financial Year 2015-16 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.
As
per amendment made by finance bill 2016, the receiver of dividend is liable to pay tax @ 10% on
such dividend if the amount of dividend exceeds Rs. 10 lakhs.
Now
in case of Private Limited Company going in Profits, the withdrawal of the
profits by the Shareholders has been made costlier than earlier. Now the Shareholder in case gets more than
Rs.10 Lac as dividend will have to pay tax @10% after passing of the Finance Bill 2016.
115BBDA proposed to be
inserted to provide that in addition to
Dividend Distribution Tax paid by the companies which comes to the tune of 17.64705 %,
the recipients i.e individuals, HUFs and
firms receiving dividend in excess of Rs.10 lacs per annum will pay tax @10% of
gross amount of dividend.
Where the recipient is a company, section is
not applicable. The reasoning behind introduction of this section is that the tax
payer having high dividend income are subjected to tax only u/s 115O whereas
such income in their hands would have been chargeable to tax @30%.
Rate of STT in case of option
is proposed to be increased from 0.017% to 0.05% w.e.f. 01.06.2016
Earlier Provision upto 31.03.2016 is hereunder:
Dividend Distribution Tax Rate :
Such
dividend distribution tax shall be payable @ 17.65% plus surcharge @ 12% plus
education cess @ 2% plus SHES @ 1% of amount so declared, distributed or paid
(effective tax rate after grossing up w.e.f. 1-10-2014)
·
Exemption
For amount received from It's subsidiary as dividend
As
per section 115O-(1A) Dividend to be distributed shall be reduced by the amount
of dividend received by the domestic company during the Financial Year from its
subsidiary and such subsidiary company is a domestic company and where such
subsidiary is a domestic company, the subsidiary has paid the tax (DDT) on such
dividend or where such subsidiary is a Foreign Company, the tax is payable by
the domestic company u/s 115BBD on such dividend and further shall be reduced
by the amount of dividend paid to any person for or on behalf of the New
Pension System Trust referred to in Clause (44) of Section 10.
·
Due
Date:
The
principal officer of the domestic company and the company shall be liable to
pay the tax on the dividend distribution profit within 14 days from the date of
declaration or distribution or payment of any dividend, whichever is earlier
·
The
distributed profit on which tax is paid u/s 115-O(1) shall be exempted in the
hands of share holder u/s 10(34). As per
amendment made by finance bill 2016, the receiver of dividend is liable to
pay tax @ 10% on such dividend if the amount of dividend exceeds Rs. 10 lakhs.
·
Interest
payable for non-payment of tax by domestic companies — section 115-P:
Where the principal officer
of domestic company and the company fail to pay the whole or any part of tax on
distributed profits within the time i.e. 14 days, he or it shall be liable to
pay simple interest @ 1% for every month or part thereof on amount of such tax
for the period beginning on the date immediately after the last date on which
such tax was payable and ending with the date on which the tax is actually
paid.
·
Consequences
for non payment of dividend distribution tax —Section. 115-Q
If
principal officer of a domestic company and the company does not pay tax on
distributed profits in accordance with the provisions of Section 115-O, then,
he or it shall be deemed to be an assessee in default in respect of the amount
of tax payable by him or it and all the provisions of the Income-tax Act, 1961
for the collection and recovery of income tax shall apply.
The Computation of dividend may be illustrated as follows
till – As per Current Provision
|
Particulars
|
Computation
|
|
|
Dividend
Distributed
|
100
|
10000000
|
|
Rate of
Dividend distributed tax
|
15
|
|
|
Grossed
up Tax Rate
|
15/85*100
(17.647)
|
1764705
|
|
Surcharge
|
12%
|
211765
|
|
E.Cess
& S.H.E.C
|
3%
|
59294
|
|
Net
Effective Tax Rate
|
20.35765(17.647*1.12*1.03)
|
2035765
|
