Dear Friends,
A company's share of 50% is taken by another one. The company wants to distribute its accumulated profit as dividend to existing shareholders . What are the tax consequenses ? Is there any problem under Companies Act ?
2 Replies
Arvind Sharma
(ACA)
(1432 Points)
Replied 08 June 2011
You have to comply with Sec 205 of the Companies Act, 1956
and about Income Tax Act, there will be Dividend Distribution tax to be paid by the Company @ 15% (lpus surcharge @ 7.5% & cess % 3%) the credit of which is not available. And this tax is not an deductable expenses.
Manoj BG
(Tax Professional and in Service)
(1795 Points)
Replied 08 June 2011
You can distribute dividend as you mentioned. Further, as far as Income tax is concerned, as arvind rightly said, U have to pay DDT as mentioned above.
As per companies Act, you have to transfer certain sum of money based on the rate of divident to the general reserves under Companies (Transfer of Profit to the Reserves) Rules.
Thanks and regards,
Manoj B. Gavali
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