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.
CA Harish Negi
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hiren shekhada says
hi very good article.
thanks for sharing.