Rish s
Quick Summary
Payment by a company to whom
- to Equity shareholder holding 10% or more
- to any "concern" in which "Equity shareholder holding 10% or more" has "substantial interest" (i.e. a beneficial owner of 20% or more of the concern's income"
- to anyone on behalf of "Equity shareholder holding 10% or more".
(Any subsequent repayment / adjustment against remuneration / rent etc. is immaterial. Such payment will still be taxed)
How much will be treated as a dividend?
- To the extent of accumulated profits (accumulated profits calculated till the date of payment)
When is it taxed?
- The payment is taxed in the year of payment.
Any exception to section 2(22)(e)
- Any payment by NBFC as loan or advance in ordinary course of business
Taxability in hands of Company
- Nil (Section 115(0) has been amended effective 1-4-20 and dividend distribution tax is not applicable from 1-4-20 (including tax on deemed dividend).
Taxability in hand of shareholder
- Dividend is taxable u/s 56 in hands of shareholder from 1-4-20 and exemption u/s 10(34) has been removed.
FAQ :
A deemed dividend is a payment made by a company to an equity shareholder holding 10% or more, to a 'concern' in which that shareholder has a substantial interest (beneficial owner of 20% or more of income), or to anyone on behalf of such a shareholder.
The amount treated as a dividend is up to the extent of the company's accumulated profits calculated until the date of payment.
The payment is taxed in the financial year in which the payment is made.
Yes, any payment made by an NBFC as a loan or advance in the ordinary course of its business is an exception.
No, dividend distribution tax is not applicable from April 1, 2020, due to amendments to Section 115(O).
From April 1, 2020, deemed dividends are taxable in the hands of the shareholder under Section 56, as the exemption under Section 10(34) has been removed.
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