Definition
Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders.
Dividends can be issued in various forms, such as cash payment, stocks or any other form.
A company’s dividend is decided by its board of directors and it requires the shareholders’ approval.
However, it is not obligatory for a company to pay dividend. Dividend is usually a part of the profit that the company shares with its shareholders
Rate of TDS u/s 194
The rate under this section is 10%. TDS will be deducted at time of payment(via cash, cheque, draft etc) or credit, whichever is earlier.
Exceptions of section 194
No tax deduction will be made u/s 194 in case of shareholder (who is an individual), when:
- The dividend is paid by way of account payee cheque & such amount (alone or aggregate during financial year) does not exceed Rs.2500.
- Dividend is covered under section 115-O.
- The dividend is paid to LIC, GIC or its subsidiaries or to any other insurer in respect of the shares that are owned by them or in which they have a full beneficial interest.
- If you have submitted Form I5G/15H as your income is below the taxable limit.
Section 2(22)(a)
Dividend includes any distribution by a company of accumulated profits, whether capitalized or not if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company.
Section 2(22)(b)
Any distribution to its shareholders by a company of debentures, debenture-stock or deposit certificates in any form, whether with or without interest and
Any distribution to its preference shareholders of shares by way of bonus
Section 2(22)(C)
Dividend includes any distribution made to the shareholders of a company on its liquidation, to the extent to which such distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalized or not
Section 2(22)(d)
Dividend includes any distribution to its shareholders by a company on the reduction of its capital to the extent to which the company possesses accumulated profits, whether capitalized or not
Section- 2(22)(e) Loans & Advances by Closely held Company Deemed as Dividend
Dividend Includes: Any payment by a company not being a company in which public are substantially interested of any sum by way of loan or advance to be-Deemed as the dividend in the hands of the shareholder
Conditions:
- A shareholder is the beneficial owner of shares
- Holding not less than 10% of the voting power
