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By: CA Harish Negi | Filed Under: Income tax | Updated on: May 18, 20174 Comments

Dividend Distribution Tax Under Section 115O

Dividend distribution tax is paid as per section 115O for any amount declared, distributed or paid by a domestic company by way of dividend ( whether interim or otherwise), whether out of current or accumulated profit.

The rate for dividend distribution tax is mentioned below:

Name of Tax Tax rates
Dividend Distribution Tax (DDT) 15%
Surcharge 12%
Education Cess 2%
Secondary & Higher Education Cess 1%

 Due Date for payment of Dividend distribution Tax (DDT)

Dividend distribution tax is paid within 14 days from the date of:

  • Declaration of any dividend
  • Distribution of any dividend
  • Payment of any dividend

Whichever is earliest.

How to calculate dividend distribution tax(DDT)

The dividend amount payable is increased by such amount as would, after reduction of the tax (DDT) on such increased amount at the rate specified in section 115 O(1), be equal to the dividend amount payable.

Example:

A company wants to pay Rs. 85 as dividend, then the DDT calculation will be as follows:

Particular Amount in Rs.
Dividend Payable 85
Increase by Rs. 15 i.e [( 85×0.15)/ (1 – 0.15)] 15
Increased amount 100
Dividend distribution Tax @15% of Rs. 100 15
Surcharge on DDT @12% 1.8
EC & SHEC on (DDT + Surcharge) i.e 16.8 @3% 0.504
Total Dividend distribution tax Payable (15+1.8+0.45) 17.304

Effective rate of DDT paid

Rs. 17.304paid on Rs. 85 so the effective rate is (17.25/85×100)i.e20.35765%

What are the Deduction available from Dividend Payable?

The dividend payable shall be reduced by

  • the amount of dividend received by the domestic company from its subsidiary and
  • If the subsidiary is domestic company, the subsidiary has paid the DDT under section 115O
  • If the subsidiary is foreign company, the tax is payable by holding company under section 115BBD
  • The amount of dividend paid to any person for or on behalf of New Pension System Trust referred in section 10(44)

How to Pay Dividend Distribution Tax?

Step 1: Go to this link https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

  

Step 2: Choose the Challan no 280

Step 3: Fill all relevant details and choose Type of payment (106) Tax on Distributed Profit

 

Step 4: Finally pay the amount and save the challan.

I hope that most of information on dividend distribution tax is provided in this article. You can also go through the section 115O for more information on it.

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CA Harish Negi

CA Harish Negi

Hey readers, welcome to my blog investsaver.com. I am Chartered Accountant by Profession and I love to write on tax & money matters. You may ask your queries through comments related to the topic, I will be happy to answer them.
CA Harish Negi

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Comments

  1. hiren shekhada says

    June 8, 2017 at 5:51 am

    hi very good article.
    thanks for sharing.

    Reply
  2. siva prasad lavu says

    October 12, 2017 at 6:17 am

    Thank you sir have a valuable article and very clearly you write that article
    What is the consequence while non payment of DDT in the given time (14 Days)

    Thank you
    For sharing the article

    Reply
  3. Mamta says

    November 16, 2017 at 7:54 am

    Sir,

    In this case what will be outflow of funds from the Co.??
    Dividend Payable 85
    Tax 17.304
    TOTAL Outflow 102.304

    Reply
  4. SREEKUMAR says

    December 18, 2017 at 3:17 am

    DOES REGULAR EQUITY MUTUAL FUNDS HAVE TO DDT. OR IN OTHER WORDS WHICH IS BETTER. INVESTING IN DIRECT GROWTH OR DIRECT GROWTH IN AN EQUITY MUTUAL FUND IF YOU ARE NOT WORRIED ABOUT CASH FLOW.
    I WOULD LIKE TO KNOW WHERE THE DDT IF DEDUCTED FROM A REGULAR PLAN IS ADDITIONALLY AVAILABLE TO AN INVESTOR WHO OPTED FOR A GROWTH PLAN

    KINDLY RESPOND

    Reply

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