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Dividend By Private Ltd Company is EXempt or taxable

Rajesh Poddar (Chartered Accountant) (321 Points)

25 April 2010

Dear Friends,

A Private Ltd. company declares Dividend. It also pays Dividend distribution tax.

IS the amount of Dividend received is exempt in the hands of shareholder or Taxable in the hands of shareholder?

EVen if 2(22)(e) is applicable is the dividend taxable or exempt in the books of shareholders ?

Please reply

CA Rajesh Poddar

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6 Replies

Narayanan.R (Chartered Accountant) (191 Points)
Replied 25 April 2010

IF the company pays DDT then it is not taxable in the hands of Share holders. How can we tax twice on the same income.

So shareholder need not pay tax

Tahseen Tabassum (CA-FINAL) (644 Points)
Replied 25 April 2010

Yes it is exempt in the hand of shareholders u/s 10(34)

vikash rathi (Chartered Accountant) (787 Points)
Replied 25 April 2010

Originally posted by : Tahseen Tabassum
	Yes it is exempt in the hand of shareholders u/s 10(34)

agree....with it

Shiva Kumar (CA Final) (208 Points)
Replied 25 April 2010

IF DDT Is paid, then such dividend is exempt in the hands of the ShareHolders.

However, if a payment is deemed as Dividend u/s 2(22)(e), then

1. DDT is not applicable under 115O

2. COnsequently, it is taxable in the hands of the shareholders

3. Also, the company is liable to deduct tax on such deemed dividend.

Shiva

badrinarayanan (student) (80 Points)
Replied 19 December 2016

What is the tax rate of deemed dividend taxable under section 2(22)(e)?

Vishal Goel (Chartered Accountant) (1688 Points)
Replied 21 December 2016

Hello

Deemed Dividend is taxed under the head Income from Other Sources U/s 56 is taxable in the hands of shareholder (Not in the hands of loaned company). Also Deemed Dividend u/s 2(22) (e) is not exempt u/s 10(33) of the Income Tax Act. No special rate of tax is applicable to deemed dividend and it is taxed as income chargeable to tax at normal rates – slab rates in case of individuals & HUF’s.