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Dividend Distribution Tax

RITESH KHANDELWAL (Corporate Taxation) (168 Points)

08 April 2008

Dear Member,

I would like to know if I have paid Dividend of Rs. 9,62,500 on 6th Feb 2008, on which I have not paid Dividend Distribution tax .Now in case i pay it on 10th of April 2008, plz suggest me the Interest amt that i need to pay on DDT. I guess it's applicable @ 1% p.m as i am not able to find out the amt accurately. Thanx.....

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G. MUKUND (CHARTERED ACCOUNTANT) (23 Points)
Replied 08 April 2008

Accoridng to Seection 115P of Income Tax Act non payment of tax on distributed profits referred to in sub-section (1) of section 115-O, within the time allowed under sub-section (3) of that section, is liable to pay simple interest at the rate of one per cent for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.

The tax has to be paid within 14 days from

a. declaration of dividend or

b. distribution of dividend or

c. payment of dividend

earliest of the a, b or c

In your case assuming the dividend paid date of 6th feb 08 is earliest then the tax should have been paid before 20th Feb 2008. Since is to be paid on 10th Apr 2008 interest at 1% per month beginning from 21st Feb 2008 to 10th Apr 2008 has to be paid. The interest will be 3% (Feb, Mar and April) on the tax amount.