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What can i do with reserves?

Jayesh (Proprietor) (141 Points)

06 March 2014

I have a small private limited company established few years ago. As of previous year-end, I had around 20 lacs as Reserves and Surplus. I will not need to invest this money in business. Can I just spend some of it on personal stuff? If I want to take it out, will I have to pay it out to directors as dividend and pay DDT on it? Any other option?

Thanks.

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3 Replies

SHASHANK AGARWAL (self employed) (114 Points)
Replied 06 March 2014

For any amount withdrawn out of the company will be taxed as dividends and the company will have to deduct CDT @ 15% on the same.

https://knowyourtaxation.blogspot.com/

Manoj Mehta (Head Of Department (Accounts & Finance)) (1479 Points)
Replied 06 March 2014

Dear Jayesh yes you can take it out by declaring dividend in the year. You have to pay ddt on it which is currently 15% + 10% surcharge + 3% cess= 16.995%.

Jayesh (Proprietor) (141 Points)
Replied 08 March 2014

Thanks for the replies.

So, as I understand - there is absolutely no way to escape DDT.

My other question was - can the reserves be utilized for personal use - like family vacation?

For example, if my current FY income is 20 lacs and expense are 15 lacs. I will pay tax on 5 lacs gross profit. Now, can I use this year's post-tax profit or prior years accumalated profits for a familiy vacation?