Interim dividend

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Querist : Anonymous

Querist : Anonymous (Querist)

08 May 2012 What is Interim dividend

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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09 May 2012 Interim dividend is a part of profit given to a class of shareholders in between two annual general meetings of the company.

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Querist : Anonymous

Querist : Anonymous (Querist)

10 May 2012 Is it part of dividend..?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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01 August 2024 Yes, an interim dividend is a type of dividend that is part of the overall dividend distribution by a company. Here’s a detailed explanation:

### **What is an Interim Dividend?**

**1. **Definition:**
- **Interim Dividend:** This is a dividend payment made by a company to its shareholders before the company’s annual financial statements have been finalized. It is paid out of the profits earned during the financial year up to the point of the dividend declaration.

**2. **Timing:**
- **Declaration:** Interim dividends are declared by the board of directors based on the company’s financial performance at the end of a quarter or half-year, rather than waiting for the full financial year to end.
- **Payment:** It is paid before the annual accounts are finalized, providing shareholders with a return on their investment before the annual general meeting.

### **Comparison with Final Dividend:**

**1. **Final Dividend:**
- **Definition:** The final dividend is declared at the end of the financial year and is based on the profits of the entire year as reflected in the audited financial statements.
- **Approval:** It requires approval by the shareholders at the annual general meeting (AGM).
- **Timing:** Paid after the financial year-end and after the annual accounts are prepared and audited.

**2. **Interim Dividend:**
- **Declaration:** Can be declared by the board of directors without waiting for the AGM.
- **Payment:** Provided to shareholders before the financial year ends and before the annual financial statements are finalized.

### **Key Points:**

1. **Legal Basis:** The legal provisions governing the declaration of interim dividends are found in the Companies Act, 2013 (in India) or equivalent regulations in other jurisdictions.
- **India:** Under Section 123 of the Companies Act, 2013, interim dividends can be declared by the board of directors from the profits of the current financial year, up to the end of the quarter in which the dividend is declared.

2. **Profit Requirements:**
- **Current Year Profits:** Interim dividends can be paid only if there are sufficient profits in the current financial year. They are not paid out of reserves but from the profits of the current year.

3. **Accounting Treatment:**
- **Interim Dividend:** Is recorded in the company's financial statements as a liability at the time of declaration.
- **Final Dividend:** Once declared, it is also recorded as a liability until paid.

### **Summary:**

- **Interim Dividend**: A dividend declared and paid before the end of the financial year based on current profits.
- **Part of Dividend Distribution**: Yes, it is part of the overall dividend distribution but specifically pertains to payments made before the annual accounts are finalized.

Interim dividends provide a way for companies to distribute profits to shareholders more frequently, thus offering them returns on their investments sooner rather than waiting for the annual financial statements to be prepared.

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