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Tax on certain dividends received from domestic companies.
115-BBDA. (1) Notwithstanding anything contained in this Act, where the total income of [an assessee, being an individual, a Hindu undivided family or a firm], resident in India, includes any income in aggregate exceeding ten lakh rupees, by way of dividends declared, distributed or paid by a domestic company or companies, the income-tax payable shall be the aggregate of—
(a) the amount of income-tax calculated on the income by way of such dividends in aggregate exceeding ten lakh rupees, at the rate of ten per cent; and
(b) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of income by way of dividends.
(2) No deduction in respect of any expenditure or allowance or set off of loss shall be allowed to the assessee under any provision of this Act in computing the income by way of dividends referred to in clause (a) of sub-section (1).
(3) In this section, "dividends" shall have the same meaning as is given to "dividend" in clause (22) of section 2 but shall not include sub-clause (e) thereof.
Some Practice notes by Author-
## Dividend must be received from DOMESTIC company (ref. sec 2(22A) which means any INDIAN CO (Co. Incorporated in India) AND includes Foreign company (which declares its dividend as per the sec 115-O and pay dividend distribution tax),
## Dividend must be in the same meaning e.g.Interim; Final; Proposed etc and Deemed dividend which has been mentioned in -
Sec 2 (22 ) a - Distribution of Assets of company,
Sec 2 (22) b - Distribution of Debentures, Debentures stock/ deposits certificates & Bonus shares to Preference shareholders,
Sec 2 (22) c - Distribution at the time of liquidation,
Sec 2 (22) d - By way of reduction in capital,
## Only applies if the recipient is "RESIDENT - Individual or HUF or Partnership Firms,
## Total Dividends from all domestic companies (one or more domestic companies) should be MORE THAN 10 lacs in the PY,
## 10% rate (plus surcharge/cess, if applicable) will be liable on EXCESS portion of dividend only which means upto INR 10 lacs it will still be exempted u/s 10(34),
## No expenditure is allowed while using the 10% tax liability on the portion as mentioned above and also any losses in other head of income will be allowed to set off this income,
## "Sec 2 (22)-e" which talks about the cases where advances in the nature of loan has been given to a person who is holding 10% or more voting rights (equity only) OR another company where such person is holding 20% or more voting rights etc has not been covered here BECAUSE the dividend under the sec 2 (22) e are liable to be paid by the person who receives such DIVIDENDS and hence this type of DIVIDENDS will be taxed by normal slabs rates as before and will not be covered here,
It is interesting to note that all such dividends are being taxed initially on DOMESTIC COMPANIES u/s 115O and exempt u/s 10 (34) in the hands of recipient however after the introduction this section it will definitely be somehow DOUBLE tax on the same amount in case certain person falls within this SECTION.
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