Dividend distribution tax

Earlier position

if co wants to distribute RS 100 as dividend , then co deducts 16.995 as DDT and pays Balance 83.005.

But now from 1.10.2014 (Due to amendment)

Grossing up is applicable . (Institure Journal - Aug 14 :- Total tax rate after applying gross up concept will  be 20.47%).

Please solve the above example by applying the concent of gross up.

How to gross up and upon which figure the 20.47 % will be applied.

 

Thanks in advance.

Replies (4)

where have you read this?? can you provide me the link?

Originally posted by : Akanksha Jain
where have you read this?? can you provide me the link?

https://220.227.161.86/34301cajournal-aug14-8.pdf

See Point No 3

I have read the amendment. 

let me explain the new provision with an example. 

Suppose a company wants to distribute Rs. 100 as dividend

Initially (before amendment) the company deducts Rs. 14.526 (100*16.995/16.995) and distributes Rs. 85.474 as dividend. As the provision states that 16.995% of the dividend distributed.

Here, dividend distributed was Rs. 85.474 and Rs. 85.474*16.995% = Rs. 14.526

This is the provision before amendment.  

Now, after amendment if a company wants to distribute Rs. 100 as dividend it will deduct Rs.16.995 (Rs. 100*16.995%) as tax and distribute Rs. 83.005 as dividend. 

So. effective tax rate is 20.474% as Rs. 83.005*20.474% = Rs. 16.995

Therefore increase in tax is 3.479% (20.474 - 16.995)

Thanks a lot. 

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