Dividend received from foreign company

Save Share

This query is : Resolved

Quick Summary

An Indian resident received a dividend from a foreign company, initially placed in escrow and later encashed in a subsequent financial year. The US issued a Form 1042-S indicating no US tax was deducted as the dividend was exempt there. The core questions are whether this dividend is taxable in India, in which financial year it should be declared (year of escrow or year of encashment), and if any double taxation relief is available.

Sharan KB

Sharan KB (Querist)

20 June 2021 Dear sir,
Indian resident have received the dividend from foreign company, however initially such dividend was transferred to Escrow and later Assessee has encashed it in different year, and also income summary statement (form 1042-S)captures this income the year in which it (dividend) transferred to Escrow A/c. Form 1042-S shows that dividend income is exempted in USA, hence no tax is deducted in USA for this Income.

Question.
1. is this income is taxable in India ?
2. If taxable in the sense in which it has to be taxed? ( dividend transferred to Escrow A/c FY 209-20 but Assessee encashed in FY 2020-21)
3. Is there any relief available for this income?

Please give your valuable opinion on this issue.

Thanks in advance

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

20 June 2021 1 yes, it's taxable in India.
2 Dividend taxable in the year of amount received.
3 Dividend received from a foreign company gets taxed both in India and in the home country of the foreign company. However, if the tax on an international company's dividend has been paid twice (i.e. paid in both the nations), then the taxpayer can claim double taxation relief.

Sharan KB

Sharan KB (Querist)

26 June 2021 Hi sir,
dividend transferred to Escrow account in 2019-20 but this dividend encashed it in 2020-21, you mean to say this income is taxable in the year 2019-20 it self?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

26 June 2021 Who's escrow account.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now