Dividend Distribution Tax

Dividend Distribution Tax (DDT) or Corporate Dividend Tax

The salient features of DDT are as below:

(i) DDT is in addition to the income-tax chargeable in respect of the total income of a domestic company.

(ii) The dividends chargeable to DDT may be out of the current profits or accumulated profits.

(iii) The rate of DDT is 15% (excluding surcharge of 12% plus secondary and higher education cess is (2+1) 3%).

(iv) DDT should be payable even if no income-tax is payable by the domestic company on its total                        income.

Example 
X Ltd., a domestic company, has distributed on 5th April 20X1, dividend of `230 lakh to its shareholders. Compute the Dividend Distribution tax payable by X Ltd.

Solution

Calculation of corporate dividend tax 
Particulars                                                                                                                 Rs. (in lakh)
Dividend distributed by X Ltd.                                                                                       230
Add: Increase for the purpose of grossing up of dividend
                                              [230x15/100-15]                                                             40.58
Gross Dividend                                                                                                           270.59
Dividend distribution tax @ 15% [15% of Rs. 270.59 lakh]                                           40.59
Add: Surcharge @ 12%                                                                                                  4.88 
                                                                                                                                   45.47
Add: Education cess @2% and SHEC@1%                                                                     1.36
Dividend distribution tax                                                                                              46.83