Dividend distribution tax

Q&A: Questions & Answers
1

All,

I am not sure if I am understanding this correct. Please help

As of now companies pay 13% as tax on the amount it decides to payout as dividend and this is increased to 15%? This means we might get less dividend but we wont have to pay tax on dividend received?

2

Hi Sathyaraj

Dividend distribution tax is paid by the company, not individuals. Companies generally decide the after tax dividend they want to pay and pay the taxes due to the government. But there could be different ways to look at it especially for companies with higher payout.

Andyes, the tax liability on the companies will increase due to the change in taxation. Earlier it was 13% on pre tax amount (13/87 = 14.9% on the dividend that we recieve). Now it is 15% on pre tax amount (15/ 85 = 17.6% on the dividend we recieve).

http://economictimes.indiatimes.com/news/economy/policy/budget-2014-dividend-distribution-tax-to-hurt-corporates/articleshow/38158720.cms

3

Thanks Gaurav,

I was confused seeing that 15% was the tax even before.

I understand from your post how the % was post tax(net) before and it is pre tax(gross) now.

Thanks again!