Dividend distribution tax calculation

Originally posted by : Kartikey Jain
Rate of DDT is 15%. However the catch here is that it is to be computed on "grossing up" basis. So if a company has to declare dividend of Rs 100,000. Instead of Rs 15000 DDT, the tax would be calculated by [15% / (100%-15%)] X 10,000 ; which comes out to Rs 17,647. Plus a surcharge of 12% & cess of 3% will also be charged on it. So total tax outgo = Rs 20,357.58

That is why, often it is said that the effective rate of DDT is 20.358%

Kartikey Jain Please Correct Dvidend Distribution Tax U/s 115O 15%+12%Surcharge+3% Education Cess = 17.304% Subject to Grossing Up  Grossing Up of DDT 100/(100-17.304)*17.304 = 20.925% Effective Rate   On 100 Rs Dividend DDT U/s 115O is 20.925 Rs.
Originally posted by : CA PAYAL GAJJAR
Upto 30.09.2014, the tax rate of 15% was applied on the actual dividend distributed. But w.e.f. 1.10.2014 the amt of divident distributed shall be presumed as 85% and shall be grossed up to 100% then 15% shall be applied on such gross amount. for example:

Dividend distribeted = 100

Grossing up of dididend [100/85*100]= 117.65

DDT @ 15% on 117.65=17.65

ADD:surcharge @ 10%=1.76

ADD:edu. cess @ 3%=0.58

So, in short u have to applied effective tax rate of 19.994% on Rs.100 but however subject to reduction as per sec 115-O(1A) on dividend received from subsidiary.

 

CA Payal Please Correct Dvidend Distribution Tax U/s 115O 15%+12%Surcharge+3% Education Cess = 17.304% Subject to Grossing Up  Grossing Up of DDT 100/(100-17.304)*17.304 = 20.925% Effective Rate   On 100 Rs Dividend DDT U/s 115O is 20.925 Rs.

Sir, I am very sure that grossing up of only 15% is done initially and later on surcharge and cess are to be added to the computed amount. I don't feel that the treatment specified by you is correct.

I hope some expert would throw light and clarify the practical treatment on this matter soon.

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