Tax on share of profit received from the closely held company

Eg. A Pvt. Ltd. earned a profit of Rs. 10 lacs
paid income tax on 10 Lacs @ 30% = 3 lacs

Balance profit after tax= 7 lacs transferred to it's share holders.

Will such share received from company be taxable in the hands of shareholders?

Doubt: Income of 10 lacs already taxed once. Will it be taxed again?
Replies (3)
Quick Summary
This discussion explores whether profits received by shareholders from a closely held company, after the company has already paid income tax, are subject to further taxation. It highlights that under current regulations, these distributions are taxable in the hands of the shareholders, even though the company's profit has already been taxed. This effectively leads to a double taxation scenario, as the company cannot claim dividend payments as an expense, and the shareholder must pay tax on the received income.

Even though it is paid out of tax paid income, still it is taxable in hands of shareholder since the abolition of dividend distribution tax. Said income were earlier exempted but now taxable.

 

Regards,

Manoj

But won't it lead to double taxation

It is a double taxation case since company can't claim dividend as allowance expenditure and shareholder on the other hand pays tax on said receipts. But unfortunately that what the law says.

 

Regards,

Manoj 

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