DIVIDEND DISTRIBUTION TAX• The domestic company has to pay dividend distribution tax on any amount declared, distributed or paid by such company by
way of dividend.• The rate of dividend distribution tax is 15% (plus applicable surcharge and cess)• Dividend received from domestic company is not taxable in hands of shareholders.• Deemed divided received under section 2(22)(e) from an Indian company or any dividend received from a foreign company is
taxable in hands of shareholders. Dividend Distribution Tax is hence, not applicable on Deemed Dividend• Surcharge for Dividend payments from 1.4.2015 is 12%. Education cess for is 3%.Amendment in S.115O w.e.f Assessment Year 201516Subsection 1B is introduced w.e.f Assessment year 2015‐16 wherein, the Rate of Dividend Distribution Tax shall be Grossed up on the
Amount of Dividend Declared. The dividend declared minus the DDT is now termed as Net Distributable Profits.
The computation of Dividend Distribution Tax shall be as below –
Question1. What is the formula for grossing up the DDT?
2. What is the Rate of DDT including Surcharge and Education Cess?
3. What is the DDT if the Net Distributable Profit [after DDT]is Rs.1,00,000/‐Answer1. The formula for grossing up the DDT isNet Distributable Profit of 100 divided by 0.85 = 117.64706 [Distributable Profit]2. The Rate of DDT including Surcharge and Education Cess is 20.35765%
Calculation as below‐
3. The Dividend Distribution Tax on Distributable profit of Rs.1,00,000 is Rs. 20,357/‐The essence behind this computation–A company will have cash profit to be distributed to the tune of Rs.1,20,357/‐ Such a company, pays DDT of 20,357/‐ and the
Net distributable profit of Rs.1,00,000 is paid to the shareholders as dividend
way of dividend.• The rate of dividend distribution tax is 15% (plus applicable surcharge and cess)• Dividend received from domestic company is not taxable in hands of shareholders.• Deemed divided received under section 2(22)(e) from an Indian company or any dividend received from a foreign company is
taxable in hands of shareholders. Dividend Distribution Tax is hence, not applicable on Deemed Dividend• Surcharge for Dividend payments from 1.4.2015 is 12%. Education cess for is 3%.Amendment in S.115O w.e.f Assessment Year 201516Subsection 1B is introduced w.e.f Assessment year 2015‐16 wherein, the Rate of Dividend Distribution Tax shall be Grossed up on the
Amount of Dividend Declared. The dividend declared minus the DDT is now termed as Net Distributable Profits.
The computation of Dividend Distribution Tax shall be as below –
| Particulars | Calculation |
| Net Distributable Profit | 100 |
| Add: Dividend Distribution Tax | 17.64706 |
| Distributed Profit | 117.64706 |
Question1. What is the formula for grossing up the DDT?
2. What is the Rate of DDT including Surcharge and Education Cess?
3. What is the DDT if the Net Distributable Profit [after DDT]is Rs.1,00,000/‐Answer1. The formula for grossing up the DDT isNet Distributable Profit of 100 divided by 0.85 = 117.64706 [Distributable Profit]2. The Rate of DDT including Surcharge and Education Cess is 20.35765%
Calculation as below‐
| Dividend Distribution Tax [As computed under Question 1] | 17.64706 |
| Add: Surcharge @12% | 2.11765 |
| 19.76471 | |
| Add: Education Cess @ 3% | 0.59294 |
| DDT including Surcharge and Education Cess | 20.35765 |
3. The Dividend Distribution Tax on Distributable profit of Rs.1,00,000 is Rs. 20,357/‐The essence behind this computation–A company will have cash profit to be distributed to the tune of Rs.1,20,357/‐ Such a company, pays DDT of 20,357/‐ and the
Net distributable profit of Rs.1,00,000 is paid to the shareholders as dividend
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