(Sec. 115 0) Dividend distributed by a Domestic Company is exempt from income-tax in the hands of all shareholders and the Company is liable to pay DDT @ 15 percent on such dividends. As per the current provisions of the Income-tax Act, for computation of DDT, the amount of dividend declared by the Domestic Company will be reduced by the amount of dividend, if any, received by it during the financial year if -

  • such dividend is received from its subsidiary
  • the subsidiary has paid DDT on such dividend; and
  • the Domestic Company is not a subsidiary of any other Company

With effect from 1 July 2012 the above conditions will be substituted by the following:

  • the dividend is received from its subsidiary;
  • the subsidiary has paid DDT which is payable under Sec. 115-O of the Act.

In accordance with the amendment, the condition of Domestic Company not being a subsidiary of another Company is withdrawn. Therefore, Dividends received by a Company, on which DDT is already paid can be passed on even in a multi-tier corporate structure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.