Deemed Dividend tax

In a deemed dividend situation what is the DEEMED DIVIDEND TAX to be paid by the company. Also whether it is tax free in the hands of the shareholders or more than 10 lacs will be taxable ?
Replies (3)
Quick Summary
This discussion clarifies the tax treatment of deemed dividends under Indian tax law. It explains that while deemed dividends under sections 2(22)(a), (b), (c), and (d) are generally taxable in the hands of shareholders (subject to a limit) and attract Dividend Distribution Tax (DDT) for the company, deemed dividends under section 2(22)(e) are exempt for shareholders but the company still pays DDT. Importantly, from April 1, 2020, all dividends, including deemed ones, are taxable in the shareholders' hands, with rates dependent on their individual taxability.

Deemed Dividend u/s 2(22)(a) / (b) / (c) / (d) = taxable in the hands of shareholders subject to Sec. 115 BBDA (limit or Rs. 10,00,000) 

However , Deemed Dividend u/s 2(22)(e) = exempt in the hands of shareholders 

 

Deemed Dividend u/s 2(22)(a) / (b) / (c) / (d) = Company pays DDT u/s 115 O (with Gross - Up) 

However , Deemed Dividend u/s 2(22)(e) = Company pays DDT @ 30 % (without Gross - Up) 

It is to be noted that w.e.f April 1, 2020, dividends are taxable only in the hands of shareholders including in the deemed dividend scenario. so, tax rates will be based on the taxability of shareholders

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