Dividend

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 November 2017 Dividend received from foreign company by indian PVT Company in A Y 2018-19 but income book, tax paid and benefit availed DTAA A Y 2014-15 and 2013-14. what impact on income tax current year in Tax Computation.

Year of book income and received is different foreign exchange loss and gain in year received and can be given effect in computation income tax current year.

Querist : Anonymous

Querist : Anonymous (Querist)

23 November 2017 provide advise above query

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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12 July 2024 Based on the information provided, here's a detailed explanation of how dividend income received from a foreign company by an Indian private company can impact income tax computation, especially when the book income, tax paid, and benefits under Double Taxation Avoidance Agreement (DTAA) are for different assessment years (AY).

1. **Dividend Income and Tax Computation**:
- Dividend income received by an Indian private company from a foreign company is taxable in India under the Income Tax Act, 1961.
- The taxable income would generally be computed in the assessment year (AY) in which the dividend income is received or accrued to the Indian company.

2. **DTAA Benefits**:
- DTAA between India and the foreign country may provide relief from double taxation by allowing tax credits or exemptions for taxes paid in the foreign country.
- The availability of DTAA benefits depends on the specific provisions of the agreement and the compliance requirements set forth in it.

3. **Impact on Tax Computation**:
- **Assessment Year (AY) 2018-19**: Since the dividend income was received in AY 2018-19, the Indian company would include this income in its total income for that year.
- **DTAA Benefits**: If DTAA benefits were availed in earlier AYs (such as 2014-15 and 2013-14 as mentioned), any taxes paid or relief claimed under DTAA would have been for those respective years.
- **Foreign Exchange Gain/Loss**: Any foreign exchange gain or loss arising from the receipt of dividend income in AY 2018-19 can be considered for tax computation purposes in that year.

4. **Tax Treatment in AY 2018-19**:
- The dividend income received from the foreign company would be included in the Indian company's total income for AY 2018-19.
- DTAA benefits (like tax credits for foreign taxes paid) may reduce the Indian tax liability on the dividend income, subject to the conditions and limits specified in the DTAA.
- Foreign exchange gain or loss on the receipt of dividend income can be factored into the computation of total income for AY 2018-19, depending on whether the company has opted for mark-to-market treatment or other applicable accounting standards under the Income Tax Act.

5. **Documentation and Compliance**:
- It is essential to maintain documentation supporting the receipt of dividend income, taxes paid, and benefits availed under DTAA for each relevant assessment year.
- The Indian company should ensure compliance with the provisions of the Income Tax Act and DTAA while computing and reporting dividend income in AY 2018-19.

In summary, the dividend income received from a foreign company by the Indian private company in AY 2018-19 will be taxable in India. The impact of DTAA benefits claimed in earlier assessment years (2014-15 and 2013-14) will reflect in the computation of total income and tax liability for AY 2018-19. Additionally, any foreign exchange gain or loss arising from the receipt of dividend income can also be considered in the tax computation for that year. It is advisable to seek assistance from a tax professional to ensure accurate computation and compliance with tax laws and DTAA provisions.

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