Dividend distribution tax

But Sir as per Article 25 of DTAA, I can claim credit of with holding tax deducted while receiving dividend from Foreign entity. So, Don't I need to pay tax @ 15 % + 5 % Surcharge + 3 % cess= 16.22% -15% with holding tax = 1.22% on gross amount of dividends received. 

Dear Shikha,

The credit of withholding tax cannot be taken while computing tax u/s 115BD. You have to pay tax @ 15%.

 There is no limit provided in income tax act for the amount to be distributed as dividend. You just need to pay the amount of DDT on it. U can deduct the amount of dividend received from foreign subsidary from the whole amount of dividend while calculating DDT if u have paid tax @ 15% u/s 115BBD.

Please find in attachment the file which says credit of with holding tax is available. Even Article 25 of DTAA also says so.

Shikha your point is really good. actually recently i did one bank audit they have not taken the claim of withholding tax paid by them on such dividend. It is not mentioned anywhere that such credit should not be allowed. I thing I got confused with the expenditure mentioned in that section that no expenditure can be claimed from such dividend income.

The file given by u is of Deloitte. I think u should take the credit.

Are there any other compliances as per company's act in case of dividend distribution in private limited company?

Also, is there any specific adjustment when consolidated balance sheet will be prepared?

Where the total income of an assessee, being an Indian company, for the previous year relevant to the assessment year beginning on the 1st day of April, 2012 includes any income by way of dividends declared, distributed or paid by a specified foreign company, the income-tax payable shall be the aggregate of

(a)  the amount of income-tax calculated on the income by way of such dividends, at the rate of fifteen per cent; and

 (b)  the amount of income-tax with which the assessee would have been chargeable had its total income been reduced by the aforesaid income by way of dividends.

If the government want to give credit of Withholding tax paid on such dividend then the language of clause (b) would be diffrent.

Yes there are specific pronvisions in the Companies Act regarding Distribution of Dividend.. The main purpose of incorporating such provisions is to ensure that any amount of capital and loan is not distributed as dividend.

Only Certain percentage ofpast year profits can be distributed.

Hey Shikha in case u will get any further information in this regard from any other source then please update it here.

Thanks

Rohit Gupta

RHT1203 @ gmail.com