Dividend Distribution Tax implication on Income Tax

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  1. Jalphonse

    Jalphonse New Member

    What is the impact of receiving a 1.5 Cr dividend (after DDT payout) for a promoter in a private LTD company with annual income of 96 Lacs? Apart from 20.1% DDT paid by company and 10% tax on 1.4 Cr (dividend in excess of 10 lacs), would the 1.36 cr received in hand be added to the annual income of 96 Lacs and further subject to the surcharge (income above 1 cr)? Or is the dividend received after payout of DDT and 10% by individual not added to the income for purposes of IT computation? Please clarify.
    Last edited: Jul 16, 2016
  2. Jalphonse

    Jalphonse New Member

    Karan sir awaiting your valuable reply.
  3. ZED

    ZED Well-Known Member

    To be added and surcharge is to be applicable.

    The dividend is to be taxed as per S.115BBDA [Cited for your reference] and the tax is to be increased by surcharge.

    Extracts from Finance Act 2016

    [In respect of advance tax]
    Provided also that in respect of any income chargeable to tax under sections 115A, 115AB, 115AC, 115ACA, 115AD, 115B, 115BA, 115BB, 115BBA, 115BBC, 115BBD, 115BBDA, 115BBE, 115BBF, 115E, 115JB or 115JC of the Income-tax Act, “advance tax” computed under the first proviso shall be increased by a surcharge, for purposes of the Union, calculated,— (a) in the case of every individual or Hindu undivided family or association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, calculated at the rate of fifteen per cent. of such “advance tax”, where the total income exceeds one crore rupees;

    115BBDA. (1) Notwithstanding anything contained in this Act, where the total income of an assessee, being an individual, Hindu undivided family or a firm, resident in India, includes any income in aggregate exceeding ten lakh rupees, by way of dividends declared, distributed or paid by a domestic company or companies, the income-tax payable shall be the aggregate of—

    (a) the amount of income-tax calculated on the income by way of such dividends in aggregate exceeding ten lakh rupees, at the rate of ten per cent; and

    (b) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income by way of dividends.

    (2) No deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the assessee under any provision of this Act in computing the income by way of dividends referred to in clause (a) of sub-section (1).

    (3) In this section, "dividends" shall have the same meaning as is given to "dividend" in clause (22) of section 2 but shall not include sub-clause (e) thereof.
    Last edited: Jul 17, 2016
  4. Jalphonse

    Jalphonse New Member

    Thanks a ton, Zed. Can you also provide a working of the net tax impact in the case I have provided above.
  5. ZED

    ZED Well-Known Member

    • Tax on income other than the income falling u/s 115BBDA will be taxed as per normal provisions of the Act.
    • Tax on income falling u/s 115BBDA shall be charged at 10% and the same shall be increased by a surcharge of 15%.
    • Add the above 2 taxes and compute Education and secondary and higher education cess on both.
    • The other income is 96 Lacs and surcharge is applicable if income exceeds one crore.
    • Kindly note that since the income other than the income falling u/s 115BBDA is less than one crore, surcharge will not be applicable on 96 Lacs, reiterating that it shall apply on tax u/s 115BBDA.
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