{"id":12928,"date":"2021-06-18T14:05:03","date_gmt":"2021-06-18T08:35:03","guid":{"rendered":"https:\/\/carajput.com\/blog\/?p=12928"},"modified":"2024-09-23T22:02:18","modified_gmt":"2024-09-23T16:32:18","slug":"taxation-of-dividend","status":"publish","type":"post","link":"https:\/\/carajput.com\/blog\/taxation-of-dividend\/","title":{"rendered":"OVERVIEW ON TAXATION OF DIVIDEND"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Page Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d005fabb11c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d005fabb11c\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#OBLIGATION_OF_THE_DOMESTIC_COMPANIES\" title=\"OBLIGATION OF THE DOMESTIC COMPANIES\">OBLIGATION OF THE DOMESTIC COMPANIES<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#TAXATION_IN_THE_HANDS_OF_SHAREHOLDERS\" title=\"TAXATION IN THE HANDS OF SHAREHOLDERS\">TAXATION IN THE HANDS OF SHAREHOLDERS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#TAXATION_OF_RESIDENT_SHAREHOLDER\" title=\"TAXATION OF RESIDENT SHAREHOLDER\">TAXATION OF RESIDENT SHAREHOLDER<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#DEDUCTIONS\" title=\"DEDUCTIONS\">DEDUCTIONS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#TAX_RATE\" title=\"TAX RATE\">TAX RATE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#SECTION\" title=\"SECTION\">SECTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#TYPE_OF_ASSESSEE\" title=\"TYPE OF ASSESSEE\">TYPE OF ASSESSEE<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#PARTICULARS\" title=\"PARTICULARS\">PARTICULARS<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#TAX_RATE-2\" title=\"TAX \nRATE\">TAX \nRATE<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#TDS_ON_DIVIDEND_INCOME\" title=\"TDS ON DIVIDEND INCOME\">TDS ON DIVIDEND INCOME<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#_TAXABILITY_UNDER_DTAA\" title=\"\u00a0TAXABILITY UNDER DTAA\">\u00a0TAXABILITY UNDER DTAA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#INTER-CORPORATE_DIVIDEND\" title=\"INTER-CORPORATE DIVIDEND\">INTER-CORPORATE DIVIDEND<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#PAYMENT_OF_DIVIDEND_BY_ONE_DOMESTIC_COMPANY_TO_ANOTHER\" title=\"PAYMENT OF DIVIDEND BY ONE DOMESTIC COMPANY TO ANOTHER\">PAYMENT OF DIVIDEND BY ONE DOMESTIC COMPANY TO ANOTHER<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#PAYMENT_OF_DIVIDEND_BY_FOREIGN_COMPANY_TO_DOMESTIC_COMPANY\" title=\"PAYMENT OF DIVIDEND BY FOREIGN COMPANY TO DOMESTIC COMPANY\">PAYMENT OF DIVIDEND BY FOREIGN COMPANY TO DOMESTIC COMPANY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#NON-APPLICATION_OF_MAT_ON_DIVIDEND_INCOME_TO_A_FOREIGN_COMPANY\" title=\"NON-APPLICATION OF MAT ON DIVIDEND INCOME TO A FOREIGN COMPANY\">NON-APPLICATION OF MAT ON DIVIDEND INCOME TO A FOREIGN COMPANY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#ADVANCE_TAX_LIABILITY_ON_DIVIDEND_INCOME\" title=\"ADVANCE TAX LIABILITY ON DIVIDEND INCOME\">ADVANCE TAX LIABILITY ON DIVIDEND INCOME<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#Rate_of_Income_tax_for_Companies\" title=\"Rate of Income tax for Companies\u00a0\">Rate of Income tax for Companies\u00a0<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#Income_tax_rate_in_case_of_capital_Gain_regulation_in_India\" title=\"Income tax rate in case of capital Gain regulation in India\">Income tax rate in case of capital Gain regulation in India<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-19\" href=\"https:\/\/carajput.com\/blog\/taxation-of-dividend\/#Ready_Recknor_for_calculating_capital_gains_tax_for_all_class_of_Assets\" title=\"Ready Recknor for calculating capital gains tax for all class of Assets.\">Ready Recknor for calculating capital gains tax for all class of Assets.<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p><a href=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/06\/COMPLETE-OVERVIEW-ON-TAXATION-OF-DIVIDEND.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-12929\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/06\/COMPLETE-OVERVIEW-ON-TAXATION-OF-DIVIDEND.jpg\" alt=\"COMPLETE OVERVIEW ON TAXATION OF DIVIDEND\" width=\"1077\" height=\"807\" \/><\/a><\/p>\n<p><span style=\"color: #ff0000;\"><strong>TAXATION OF DIVIDEND W.E.F FY 2020-21<\/strong><\/span><\/p>\n<p>Up till Assessment Year 2020-21, shareholders were not taxed in respect of the <a href=\"https:\/\/www.caindelhiindia.com\/blog\/income-tax-treatment-of-a-companys-dividend\/\">dividend<\/a> received by them from an Indian Company, up to an amount of Rs 10 lacs, and the respective company paying dividend shall pay the tax in the form of Dividend Distribution Tax to the government under section 115-O.<\/p>\n<p>However, after 1<sup>st<\/sup> April 2021, the domestic companies are not liable for payment of DDT and, thus, the amount of dividend received by the shareholder will be taxed in the hands of the respective shareholder. Now, since the dividend will be taxable in the hands of the shareholder, various provisions have to be revived in order to provide for allowance of expenses on dividend income, the rate of tax on dividend income, and also the treatment of inter-corporate dividend.<\/p>\n<p><span style=\"color: #000080;\"><strong>DIVIDEND UNDER INCOME TAX ACT, 1961<\/strong><\/span><\/p>\n<p>As per Section 2(22) of the Income-tax Act, the dividend includes the following &#8211;<\/p>\n<ul>\n<li>Distribution of the accumulated profits to the shareholders.<\/li>\n<li>Distribution of debentures or deposit certificates to shareholders, made out of the profits of the company and also include issue of bonus shares to preference shareholders out of said profits.<\/li>\n<li>Amount distributed to the shareholders at the time of liquidation of the commonly.<\/li>\n<li>Distribution to shareholders out of accumulated profits under the scheme of reduction in share capital.<\/li>\n<li>Loan or advance by a closely held company to its shareholder out of the amount of accumulated profits held by such company.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"OBLIGATION_OF_THE_DOMESTIC_COMPANIES\"><\/span><span style=\"color: #000080;\"><strong>OBLIGATION OF THE DOMESTIC COMPANIES<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li>The domestic companies are not required to DDT on dividend distributed to shareholders after 1<sup>st<\/sup> April 2021. However, they shall continue to be liable to deduct tax on the said amount under Section 194.<\/li>\n<li>As per the Section 194, where any dividend is paid by a domestic company, on and after 1<sup>st<\/sup> April 2021, the same shall deduct TDS @ 10% on the amount of dividend distributed to the resident shareholders, provided the aggregate amount of dividend to be distributed or paid during a financial year exceeds Rs. 5,000. However, the said provisions shall not apply to dividend paid to Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC) or any other insurer holding shares in their own name, or as beneficial owners.<\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"TAXATION_IN_THE_HANDS_OF_SHAREHOLDERS\"><\/span><span style=\"color: #000080;\"><strong>TAXATION IN THE HANDS OF SHAREHOLDERS<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>The Section 10(34), providing for exemption of taxation of dividend in the hands of shareholders, stands withdrawn from Assessment Year 2021-20 onwards. Thus, the shareholders will now be liable to pay tax on the whole amount of dividend received during a financial year, without any exemption.<\/li>\n<li>The rate of tax and the taxability provisions on dividend, will depend upon residential status of the shareholders, and the head of income.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"TAXATION_OF_RESIDENT_SHAREHOLDER\"><\/span><span style=\"color: #000080;\"><strong>TAXATION OF RESIDENT SHAREHOLDER<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>A shareholder can be a trader or investor. Thus, where the income is earned from the trading activities, the same be taxable under the head of business income. However, the shareholder is an investor, the amount of dividend be taxed under the head of income from other sources.<\/li>\n<li>In case, dividend income is taxed under PGBP, the rate of tax will be that applicable on the other business income. The computation of the said income, be made on either mercantile system of accounting or cash basis of accounting.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"DEDUCTIONS\"><\/span><span style=\"color: #000080;\"><strong>DEDUCTIONS<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Where dividend is assessed as business income, the taxpayer can claim the deductions in respect of all the expenditures incurred in relation to earn such dividend income.<\/li>\n<li>However, where the said amount is assessed under income from other sources, the taxpayer can claim deduction in respect of interest expenditure incurred for earning the dividend income, and the same be allowed to a maximum of 20% of total dividend income. Also, no deduction be allowed in respect of commission or remuneration paid to a banker or any other person for realization of such dividend.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"TAX_RATE\"><\/span><span style=\"color: #000080;\"><strong>TAX RATE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>The dividend income be taxed at the normal tax rates applicable on the respective assessee, however, in case of resident individual, being an employee of an Indian company or its subsidiary, engaged in Information technology, entertainment, pharmaceutical or bio-technology industry, and receiving dividend in respect of GDRs under a scheme of Employees\u2019 Stock Option Scheme, shall be taxable at concessional tax rate of 10% without allowing any deduction.<\/li>\n<\/ul>\n<p><span style=\"color: #000080;\"><strong>TAXATION OF NON-RESIDENT SHAREHOLDERS <\/strong><\/span><\/p>\n<ul>\n<li>It is provided, that a non-resident can invest in Indian market, either directly as private equity investors or as Foreign Portfolio Investors (FPIs). It is generally seen, that non-resident person holds shares of an Indian company as an investment, thus, the amount of dividend be taxable under the head of income from other sources.<\/li>\n<\/ul>\n<p><span style=\"color: #000080;\"><strong>TAX RATE<\/strong><\/span><\/p>\n<ul>\n<li>The dividend income received by a non-resident shareholder (including FPIs and NRIs), be taxed @ 20% without allowing any deductions. However, in case of dividend income received from investment in an offshore banking unit, the same be taxed @ 10%.<\/li>\n<li>Further, where the dividend is received in respect of GDRs issued by an Indian Company or Public Sector Company (PSU) and the same is denominated in foreign currency, the same be taxed @ 10% without allowing any deductions.<\/li>\n<\/ul>\n<table style=\"height: 749px;\" width=\"1052\">\n<tbody>\n<tr>\n<td width=\"77\">\n<h3><span class=\"ez-toc-section\" id=\"SECTION\"><\/span><span style=\"color: #000080;\"><strong>SECTION<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/td>\n<td width=\"131\">\n<h3><span class=\"ez-toc-section\" id=\"TYPE_OF_ASSESSEE\"><\/span><span style=\"color: #000080;\"><strong>TYPE OF ASSESSEE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/td>\n<td width=\"328\">\n<h3><span class=\"ez-toc-section\" id=\"PARTICULARS\"><\/span><span style=\"color: #000080;\"><strong>PARTICULARS<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/td>\n<td width=\"56\">\n<h3><span class=\"ez-toc-section\" id=\"TAX_RATE-2\"><\/span><span style=\"color: #000080;\"><strong>TAX<br \/>\nRATE<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<\/td>\n<\/tr>\n<tr>\n<td width=\"77\"><strong>SECTION<br \/>\n115AC<\/strong><\/td>\n<td width=\"131\">NON-RESIDENT INDIVIDUAL<\/td>\n<td width=\"328\">DIVIDEND ON GDRS ISSUED BY AN INDIAN COMPANY OR PUBLIC SECTOR COMPANY (PSU), PURCHASED IN FOREIGN CURRENCY<\/td>\n<td width=\"56\">10%<\/td>\n<\/tr>\n<tr>\n<td rowspan=\"2\" width=\"77\"><strong>SECTION<br \/>\n115AD<\/strong><\/td>\n<td width=\"131\">FPI<\/td>\n<td width=\"328\">DIVIDEND INCOME FROM SECURITIES HELD BY FPI<\/td>\n<td width=\"56\">20%<\/td>\n<\/tr>\n<tr>\n<td width=\"131\">INVESTMENT IN DIVISION OF AN OFFSHORE BANKING UNIT<\/td>\n<td width=\"328\">DIVIDEND INCOME FROM THESE INVESTMENTS<\/td>\n<td width=\"56\">10%<\/td>\n<\/tr>\n<tr>\n<td width=\"77\"><strong>SECTION 115E<\/strong><\/td>\n<td width=\"131\">NON-RESIDENT<br \/>\nINDIAN<\/td>\n<td width=\"328\">DIVIDEND INCOME FROM SHARES OF AN INDIAN COMPANY PURCHASED IN FOREIGN CURRENCY.<\/td>\n<td width=\"56\">20%<\/td>\n<\/tr>\n<tr>\n<td width=\"77\"><strong>SECTION<br \/>\n115A<\/strong><\/td>\n<td width=\"131\">NON-RESIDENT OR FOREIGN CO.<\/td>\n<td width=\"328\">DIVIDEND INCOME IN ANY OTHER CASE<\/td>\n<td width=\"56\">20%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<h2><span class=\"ez-toc-section\" id=\"TDS_ON_DIVIDEND_INCOME\"><\/span><span style=\"color: #000080;\"><strong>TDS ON DIVIDEND INCOME<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>As discussed above, dividend income to a non-resident shareholder, is charged to TDS deduction under section 195 of the Income-tax Act. However, where the dividend is distributed or paid in relation to GDRs issued by an Indian Company or Public Sector Company (PSU) and the same is purchased in foreign currency or to Foreign Portfolio Investors (FPIs), TDS be deducted under section 196C and section 196D, respectively.<\/li>\n<\/ul>\n<table style=\"height: 780px;\" width=\"1079\">\n<tbody>\n<tr>\n<td width=\"104\"><span style=\"color: #000080;\"><strong>GOVERNING SECTION<\/strong><\/span><\/td>\n<td width=\"104\"><span style=\"color: #000080;\"><strong>SECTION FOR TDS DEDUCTION<\/strong><\/span><\/td>\n<td width=\"274\"><span style=\"color: #000080;\"><strong>PARTICULARS<\/strong><\/span><\/p>\n<p><span style=\"color: #000080;\"><strong>\u00a0<\/strong><\/span><\/td>\n<td width=\"94\"><span style=\"color: #000080;\"><strong>RATE OF TDS, IN CASE OF OTHER NON-<br \/>\nRESIDENT<\/strong><\/span><\/td>\n<td width=\"85\"><span style=\"color: #000080;\"><strong>RATE OF TDS, IN CASE OF FOREIGN<br \/>\nCOMPANY<\/strong><\/span><\/td>\n<\/tr>\n<tr>\n<td width=\"104\"><strong>SECTION<br \/>\n115AC<\/strong><\/td>\n<td width=\"104\">SECTION 196C<\/td>\n<td width=\"274\">DIVIDEND ON GDRS ISSUED AN INDIAN COMPANY OR (PSU), PURCHASED IN FOREIGN CURRENCY<\/td>\n<td width=\"94\">10%<\/td>\n<td width=\"85\">10%<\/td>\n<\/tr>\n<tr>\n<td width=\"104\"><strong>SECTION 115AD<\/strong><\/td>\n<td width=\"104\">SECTION 196D<\/td>\n<td width=\"274\">DIVIDEND INCOME FROM INVESTMENT IN DIVISION OF AN OFFSHORE BANKING UNIT<\/td>\n<td width=\"94\">20% 10%<\/td>\n<td width=\"85\">20% 10%<\/td>\n<\/tr>\n<tr>\n<td width=\"104\"><strong>SECTION 115E<\/strong><\/td>\n<td width=\"104\">SECTION 195<\/td>\n<td width=\"274\">DIVIDEND INCOME FROM SHARES HELD IN INDIAN COMPANY PURCHASED IN FOREIGN CURRENCY.<\/td>\n<td width=\"94\">20%*<\/td>\n<td width=\"85\">\u2013<\/td>\n<\/tr>\n<tr>\n<td width=\"104\"><strong>SECTION 115A<\/strong><\/td>\n<td width=\"104\">SECTION 195<\/td>\n<td width=\"274\">DIVIDEND INCOME TO A NON-RESIDENT UNDER ANY OTHER CASE<\/td>\n<td width=\"94\">30%*<\/td>\n<td width=\"85\">40%*<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&nbsp;<\/p>\n<p>*Where the rate of TDS as per DTAA is lower than the rate prescribed under the Finance Act, then tax be deducted at the rate determined under DTAA.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"_TAXABILITY_UNDER_DTAA\"><\/span><span style=\"color: #000080;\"><strong>\u00a0<\/strong><strong>TAXABILITY UNDER DTAA<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>DTAA is the most important aspect for NRIs. Taxation aspect is of utmost important, where the assessee is receiving income from more than one country. Generally, in case of NRI, earning income in India as well as abroad, are required to pay the income tax in India and abroad both at the same time, since different countries have different tax regulations. Such scenario creates the problem of double taxation for NRIs.<\/li>\n<li>The Double Tax Avoidance Agreement is an agreement, signed by the two countries to enter into a treaty. This agreement is undertaken by the countries to provide benefit to NRIs to get relief from paying taxes multiple times. DTAA does not imply that the NRI will be relieved from tax liability, it\u2019s just that they have to pay the tax in a single country, once. Another important aspect is the rate of tax. There could be different rate for taxing an income in two countries, thus DTAA also reductions of taxes for uniformity and hence helps in reducing the instances of tax evasion<\/li>\n<li>As per most of the DTAAs, India is already in agreement with various foreign countries, and accordingly, the dividend income be taxed in the hands of the beneficial owner of shares at the rate @ 5% and can be charged up to 15% on the gross amount of the dividends received.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"INTER-CORPORATE_DIVIDEND\"><\/span><span style=\"color: #000080;\"><strong>INTER-CORPORATE DIVIDEND<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Now since the taxation aspect of dividend has shifted from companies to shareholders, a new section 80M was introduced by the Government, under the Act, with the aim to remove the cascading effect. However, no provisions have been provided in respect of dividend received by domestic from a foreign company.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"PAYMENT_OF_DIVIDEND_BY_ONE_DOMESTIC_COMPANY_TO_ANOTHER\"><\/span><span style=\"color: #000080;\"><strong>PAYMENT OF DIVIDEND BY ONE DOMESTIC COMPANY TO ANOTHER<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Section 80M was introduced, in order to remove the cascading effect, by providing that the amount of inter-corporate dividend received by a domestic company, shall be reduced from total income of company, provided the same is further distributed to their shareholders, one month prior to the due date of filing their annuals return.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"PAYMENT_OF_DIVIDEND_BY_FOREIGN_COMPANY_TO_DOMESTIC_COMPANY\"><\/span><span style=\"color: #000080;\"><strong>PAYMENT OF DIVIDEND BY FOREIGN COMPANY TO DOMESTIC COMPANY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Where, dividend is received by a domestic company from a foreign company, and such domestic company holds atleast 26% of the shareholding, the said income be taxed @ 15%\u00a0plus\u00a0Surcharge and Health and Education Cess. Such rate of tax be applied on the gross amount, without allowing any deduction.<\/li>\n<li>However, in case the company does not hold 26% of the shareholding, the dividend income be taxed at the normal rate and the company can also claim deduction in respect of all the expense incurred for earning such dividend income.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"NON-APPLICATION_OF_MAT_ON_DIVIDEND_INCOME_TO_A_FOREIGN_COMPANY\"><\/span><span style=\"color: #000080;\"><strong>NON-APPLICATION OF MAT ON DIVIDEND INCOME TO A FOREIGN COMPANY<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ol>\n<li>Provisions of MAT applies to a foreign company only where such company is a resident of a country with which India is having a DTAA agreement and such company carries business activity through a PE in India.<\/li>\n<\/ol>\n<p>However, such company shall not be taxed under the presumptive taxation schemes as provided under Section 44B, Section 44BB, Section 44BBA or Section 44BBB.<\/p>\n<ul>\n<li>However, the following incomes and expenses, already adjusted, be reversed to the net, where the company\u2019s income is taxable at a rate lower than MAT \u2013<\/li>\n<li>Capital gain on securities.<\/li>\n<li>Interest income.<\/li>\n<li>Royalty income.<\/li>\n<li>FTS<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"ADVANCE_TAX_LIABILITY_ON_DIVIDEND_INCOME\"><\/span><span style=\"color: #000080;\"><strong>ADVANCE TAX LIABILITY ON DIVIDEND INCOME<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>It is provided, that where the shortfall in the advance tax instalment arises on account of dividend income, the said shortfall shall not be subject to interest penalty under section 234C, provided the taxpayer pays the full amount of tax in the subsequent advance tax instalments. However, the said benefit shall not be available in respect of the deemed dividend under Section 2(22)(e).<\/p>\n<p><span style=\"color: #000080;\"><strong>CONCLUSION<\/strong><\/span><\/p>\n<ol>\n<li>The\u00a0<strong>Dividend Distribution Tax <\/strong>has been abolished to be paid by the companies as per Finance Act, 2020, on or after 1 April 2020 and the same be now taxed in the hands of the shareholders.<\/li>\n<li>Section 115BBDA of the Income Tax Act, which provides for exemption for tax on dividend income from Indian Companies, up to an amount of Rs. 10 lakhs, shall now stand withdrawn. The entire amount of dividend shall be subject to tax.<\/li>\n<li>Under the new provisions, the Indian company paying dividend, shall be liable to deduct TDS under Sections 194 &amp; 195 of the Income Act, 196, provided the amount of dividend to resident shareholders exceed Rs 5000 in a financial year.<\/li>\n<li>After the abolishment of DDT, many entrepreneurs are expected to form their business as company instead of setting up of a firm or LLP but provided they can handle the burden of compliances and regulations.<\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"Rate_of_Income_tax_for_Companies\"><\/span><span style=\"color: #000080;\"><strong>Rate of Income tax for Companies\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-25926\" src=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/06\/co-taxation-.jpg\" alt=\"co taxation\" width=\"1097\" height=\"1246\" srcset=\"https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/06\/co-taxation-.jpg 736w, https:\/\/carajput.com\/blog\/wp-content\/uploads\/2021\/06\/co-taxation--264x300.jpg 264w\" sizes=\"(max-width: 1097px) 100vw, 1097px\" \/><\/p>\n<p><strong>Popular Articles :<\/strong><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Income_tax_rate_in_case_of_capital_Gain_regulation_in_India\"><\/span><a href=\"https:\/\/carajput.com\/publications\/income-tax-rate-in-case-of-capital-gain-regulation-in-india.pdf\" data-cke-saved-href=\"https:\/\/carajput.com\/publications\/income-tax-rate-in-case-of-capital-gain-regulation-in-india.pdf\"><strong>Income tax rate in case of capital Gain regulation in India<\/strong><\/a><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<h3><span class=\"ez-toc-section\" id=\"Ready_Recknor_for_calculating_capital_gains_tax_for_all_class_of_Assets\"><\/span><a 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href=\"https:\/\/carajput.com\/learn\/nsdl-extension-of-qtr-tdstcs-statement-filing-dates-for-4-quarter-of-fy-201920-until-30-june.html\">Extention of TDS\/TCS statement filing Date<\/a><\/li>\n<li><a href=\"https:\/\/carajput.com\/blog\/basic-understanding-on-tds-on-payments-to-resident-contractors-professionals-section-194m-form-26qd-and-form-16d\/\">TDS payment to resident contractors<\/a><\/li>\n<li><a href=\"https:\/\/carajput.com\/blog\/consequences-of-not-deducting-tds-and-nonpayment-or-late-payment\/\">Consequences of not deducting TDS and Non payment or Late payment<\/a><span style=\"color: #000080;\">Help Need? &#8211; Contract us<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>For query or help, contact: <a href=\"mailto:singh@carajput.com\">singh@carajput.com<\/a>\u00a0or call at \u00a09555555480<\/p>\n","protected":false},"excerpt":{"rendered":"<p>TAXATION OF DIVIDEND W.E.F FY 2020-21 Up till Assessment Year 2020-21, shareholders were not taxed in respect of the dividend received by them from an Indian Company, up to an amount of Rs 10 lacs, and the respective company paying dividend shall pay the tax in the form of Dividend Distribution Tax to the government &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[9946],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/12928"}],"collection":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/comments?post=12928"}],"version-history":[{"count":5,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/12928\/revisions"}],"predecessor-version":[{"id":27511,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/posts\/12928\/revisions\/27511"}],"wp:attachment":[{"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/media?parent=12928"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/categories?post=12928"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/carajput.com\/blog\/wp-json\/wp\/v2\/tags?post=12928"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}