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Service tax on dividend received on equity shares

Sunil (Trader) (2611 Points)

02 October 2012

In case an individual provides taxable services over Rs. 10.00 lakhs and pays service tax, does he also have to pay service tax on dividends received from Indian companies on his equity investments?

Is the consideration of dividend or interest against investment in equity or securities specifically exempted in any negative list?

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6 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 03 October 2012

receiving dividend is not a service.

mehul (ca final student) (83 Points)
Replied 03 October 2012

hi U S sharma

is service tax is applicable on Dividend Payment. by company

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 03 October 2012

1st of all one has to understand what is dividend, its the share of profit for the capital introduced in the company( in gross)

so dividend tax is there, but no service tax, as the receipent is not providing any service to the payee. neither the company is going to offer any service to shareholder.

Sunil (Trader) (2611 Points)
Replied 08 October 2012

Read some guide of the department. Revenue sharing agreement of an unincorporated BOI or JV is taxable at hands of all parties. Each Individual or entity in the revenue sharing arrangement has to pay service tax on his share of revenue and the unincorporated body or joint venture also has to pay service tax as a sperate entity after taking set off of the service tax paid by each member (entity) in the unincorporated entity or joint venture.

The partners salary being business income is a taxable consideration. Not clear who is responsible for the payment. If the partner is responsible then he may get the 10 lakh exemption. If the firm is liable then all salary paid to partner would be taxable.

I wonder whether the profit sharing of a partner is considered a revenue and taxable (of course the firm can set off) as partnership firm is not an incorporated entity like a limited company or LLP. It is simply registered as a firm.