Article by Megha Kapoor and Sanjana
Bakshi*
In simple terms, distributed profits are those earnings which
are shared with shareholders as dividend. Section 115-O of the
Income Tax, 1961 refers to dividend ditribution tax as an
additional income tax. Such tax is not in the nature of withholding
tax. It is a levy on the post tax profits of the company out of
which the dividend is declared or distributed.
Thus, it is clear that the dividend distribution tax is an
income tax on the distributable profits of the domestic
company.
Pre-Amendment
Section 115-O: - Tax On Distributed Profits of Domestic
Companies
The Domestic Company shall, in addition to the income tax
chargeable in respect of its total income, be liable to pay
additional income tax on any amount declared, distributed or paid
by such company by way of dividend (whether interim or otherwise),
whether out of current or accumulated profits and shall be charged
to additional income-tax at the rate of
