Dividend tax
This query is : Resolved
31 December 2007
FACTS OF THE CASE
H Pvt Limited is a company holding 99% shares in S Pvt Limited. Balance 1% shares are held by individual shareholders who also hold shares in H Pvt Limited.
S Pvt Limited wishes to declare dividend of Rs.10,000.00 during the Financial year ending 31.3.08 and resultant dividend tax u/s 115O of the Income Tax Act will be Rs.1402.00.
H Pvt Limited will receive Rs.99,000.00 from S Pvt Limited as its share of dividend.
If H Pvt Limited wishes to declare dividend of Rs.1.00,000.00, dividend tax of Rs.14,025.00 will be levied.
QUERY
(i) Since the dividend income of Rs. 99,000.00 received by H Private Limited forms part of total income from which dividend is declared and dividend tax is paid , whether Rs.99,000.00 suffers double incidence of dividend tax.
(ii) If the answer is in the affirmative whether any relief is available.
(iii) Whether it is possible to transfer H Pvt Limited’s holding of 99% in S Pvt Limited to individual shareholders. In the event of such transfer what will be the mode of valuation of such shares.
(iv) In the event of above transfer whether the difference between fair value and face value will be treated as deemed income in the hands of shareholders.
CA Sumit Sarkar
Membership No.55816
FACTS OF THE CASE
H Pvt Limited is a company holding 99% shares in S Pvt Limited. Balance 1% shares are held by individual shareholders who also hold shares in H Pvt Limited.
S Pvt Limited wishes to declare dividend of Rs.10,000.00 during the Financial year ending 31.3.08 and resultant dividend tax u/s 115O of the Income Tax Act will be Rs.1402.00.
H Pvt Limited will receive Rs.99,000.00 from S Pvt Limited as its share of dividend.
If H Pvt Limited wishes to declare dividend of Rs.1.00,000.00, dividend tax of Rs.14,025.00 will be levied.
QUERY
(i) Since the dividend income of Rs. 99,000.00 received by H Private Limited forms part of total income from which dividend is declared and dividend tax is paid , whether Rs.99,000.00 suffers double incidence of dividend tax.
(ii) If the answer is in the affirmative whether any relief is available.
(iii) Whether it is possible to transfer H Pvt Limited’s holding of 99% in S Pvt Limited to individual shareholders. In the event of such transfer what will be the mode of valuation of such shares.
(iv) In the event of above transfer whether the difference between fair value and face value will be treated as deemed income in the hands of shareholders.
CA Sumit Sarkar
Membership No.55816
28 February 2008
When S Pvt declares dividend of only Rs 10000, how will its shareholder receive 99000 as dividend?
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