People invest in a company with the objectives of earning profit and maximise the capital gains on their investments. Indian companies give returns to their shareholders in the form of Dividends out of the profit made by them during that financial year.
Here, I would explain in detail as to What is dividend? How is it taxed? What is Dividend Distribution Tax?
Dividend can be defined as sharing of company's distributable profits with its shareholders in the proportion of shares held by them. The rate of dividend & its distribution is decided by company's board of directors and it is necessary to take the approval of the shareholders of the company to declare the dividend. It's not mandatory to pay dividends by the companies.
Interested to know Why you should not keep All Your Money in Banks Savings Account?
A company can declare a dividend only after paying the interest to its creditors. It depends upon company's discretion whether to use a portion or whole of its residual profit for dividend.
When an Indian company declares a dividend, it is mandatory for it to pay a tax on dividend which is known as Dividend Distribution Tax.
Dividend Distribution Tax is a tax that is required to be paid by the Indian domestic companies on any amount declared, distributed or paid as dividend to its shareholders.
Interest to know Become a Crorepati in the age of 40: the secret revealed
Dividend Distribution Tax is a Direct Corporate Tax. As the dividend is taxed before its distribution, it is free in the hands of shareholders. Therefore, the shareholders don't have to pay tax on dividend received by them & the dividend income received by them is fully tax free. However, the government has made some amendments w.e.f. F.Y. 2016-17 and now if dividend income exceeds Rs. 10 lakhs in any financial year, it would be chargeable at the rate of 10% for individuals, Hindu Undivided Family, Partnership Firms.
Company is required to pay Dividend Distribution Tax to the government within 14 days of declaration, distribution or payment of any dividend, whichever is earliest. If company fails to do so, it needs to pay an interest at the rate of 1% per month till it is paid. This is the responsibility of the company and the principal officer for paying the tax to the government.
26 Mar 2024
26 Mar 2024
26 Mar 2024
26 Mar 2024
26 Mar 2024
26 Mar 2024
20 Mar 2024
20 Mar 2024
01 Jan 2024
01 Jan 2024