Dividend from free reserves

This query is : Resolved

stuti shah (Querist)
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10 August 2019 What will be the consequences
As per income tax and as per company act

if Dividend is paid in private company.. more than 1/10 of p.y paid up cap and free reserves and Even dividend tax is been paid on that...

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2019 No consequences it's allowed.

stuti shah

stuti shah (Querist)
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11 August 2019 Isn't it's a limit that u can't declare and pay dividend out of free reserves more than 1/10 of it...

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2019 Agree with you, the total amount to be drawn from such accumulated profit shall not exceed 1/10th of the sum of its paid-up share capital and free reserves as appearing in the latest audite financial statement.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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11 August 2019 Declaration of Dividend out of profits for previous years which are disclosed
under the head ‘Surplus’ in the financial statements will not tantamount to
declaration of Dividend out of reserves and accordingly will not attract the
requirements prescribed.

stuti shah

stuti shah (Querist)
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12 August 2019 But sir company will have to disclose in annual filling and directors report . And what will be penalty under same

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 August 2019 Transfer back the reserves to surplus no penalty leviable being private company.