dividend paid by the company is exempt from tax u/s 115O, but dividend distribution tax should be paid by the company as per Income tax Act before dividend.According to the union budget 2007, the rate is 15%.
Equity mutual funds (with more than 65% of assets invested in equities) do not pay a dividend distribution tax, though other funds do. Liquid and Money Market funds pay 25% dividend distribution tax.
Let's say the dividend payable is $110. When the dividend is declared (eg the decision is made to pay a dividend but the dividend and tax won't be paid until, say, the first day of next month) then the entry is: Debit "Dividends Expense" (Expense Account) $110 Credit "Dividend Payable Parent Company" (Liability Account) $100 Credit "Dividend Tax Withheld" (Liability Account) $ 10 When the dividend and Tax is actually paid (eg it is now the first day of next month) the entry is: Debit "Dividend Payable Parent Company" (Liability Account) $100 Debit "Dividend Tax Withheld" (Liability Account) $ 10 Credit "Bank Account" (Asset Account) $110
It is difficult to classify it because some times it is direct tax while on other times it becomes indirect tax. If dividend tax is imposed on company itself then it is an example of indirect tax because the company can shift it towards market/ consumers by increasing the prices. Mostly dividend is paid to share holders. If dividend is distributed among share holders then definitely it increases their income, they will have to pay income tax i.e. it is direct tax. Now a days dividends are exempted from tax in order to motivate the companies to increase their production, income
A dividend is a stockhder's share of the profits from the company. This is paid pro-rata to the stockholders in either cash or more shares.
When a company issues a stock dividend, rather than cash, there usually are no tax consequences until the shares are sold. These additional shares of stock are usually distributed to shareholders at no cost. Please see the following site for additional information: http://en.wikipedia.org/wiki/Dividend
Dividend declaration and dividend payments are two different things. Anyways, the preliminary dividend decision lies on the company's current year performance(profit after tax) or previous years accumulated reserves/profits. Well in this case, the company has suffered loss in the past year(s). So if in your case, if the company has earned profit(cash profits to settle dividend obligation) in the current year it may declare and pay off the dividends irrespective of previous year loss. This previous year loss can be settled against any current year's balance or future profits, depends on certain number of years to be carried forward/backward(tax issue). Obviously, if it is loss making business the company should either restructure, divert or wind-up its activities. There are also taxation issues relating to such carried forward loss known in tax terms "tax loss".
Dividend distribution tax is the tax levied by the Indian Government on companies according to the dividend paid to a company's investors. As per existing tax provisions, income from dividends is tax free in the hands of the investor. There is a levy of 15% of the dividend declared as distribution tax. This tax is paid out of the profits/reserves of the company declaring the dividend.  The provisions of this Section applies to a domestic company for any assessment year, on an amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise)  The Company is required to pay the Dividend Distribution Tax within 14 days from the date of declaration or distribution or payment of any dividend whichever is earlier.  The said dividend distribution tax is in addition to the income tax chargeable on the total income of the Company and the same shall be payable @15% and the same shall be increased by Surcharge @10%, and such aggregate of tax and surcharge shall be further increased by an Education cess @2% and higher education cess 1% .  The Section applies to dividend payments made either out of current or accumulated profits.  The dividend so paid will be eligible for exemption for the shareholders under Section 10(34).  The Dividend Distribution Tax is payable by a Domestic Company even if no income-tax is payable on its total income.
Dividend distribution tax is the tax levied by the Indian Government on companies according to the dividend paid to a company's investors. As per existing tax provisions, income from dividends is tax free in the hands of the investor. There is a levy of 15% of the dividend declared as distribution tax. This tax is paid out of the profits/reserves of the company declaring the dividend.  The provisions of this Section applies to a domestic company for any assessment year, on an amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise)  The Company is required to pay the Dividend Distribution Tax within 14 days from the date of declaration or distribution or payment of any dividend whichever is earlier.  The said dividend distribution tax is in addition to the income tax chargeable on the total income of the Company and the same shall be payable @15% and the same shall be increased by Surcharge @10%, and such aggregate of tax and surcharge shall be further increased by an Education cess @2% and higher education cess 1% .  The Section applies to dividend payments made either out of current or accumulated profits.  The dividend so paid will be eligible for exemption for the shareholders under Section 10(34).  The Dividend Distribution Tax is payable by a Domestic Company even if no income-tax is payable on its total income.
Let's say the dividend payable is $110. When the dividend is declared (eg the decision is made to pay a dividend but the dividend and tax won't be paid until, say, the first day of next month) then the entry is: Debit "Dividends Expense" (Expense Account) $110 Credit "Dividend Payable Parent Company" (Liability Account) $100 Credit "Dividend Tax Withheld" (Liability Account) $ 10 When the dividend and Tax is actually paid (eg it is now the first day of next month) the entry is: Debit "Dividend Payable Parent Company" (Liability Account) $100 Debit "Dividend Tax Withheld" (Liability Account) $ 10 Credit "Bank Account" (Asset Account) $110
It is difficult to classify it because some times it is direct tax while on other times it becomes indirect tax. If dividend tax is imposed on company itself then it is an example of indirect tax because the company can shift it towards market/ consumers by increasing the prices. Mostly dividend is paid to share holders. If dividend is distributed among share holders then definitely it increases their income, they will have to pay income tax i.e. it is direct tax. Now a days dividends are exempted from tax in order to motivate the companies to increase their production, income
A dividend is a stockhder's share of the profits from the company. This is paid pro-rata to the stockholders in either cash or more shares.
Dividend Taxes is not a company expense but a company's liabilities for the deduction of taxes once Dividends is declared to the members of the company. It must be distinct and cleared from the normal activities of the company's expenses. In this respect, it could be classified as a sub-category of the Dividends Payable. Upon the payment of dividends, the appropriate rate of taxes must be paid on behalf of the Dividend Recipient to the Tax Authority. This would then be a debit entry to Dividend Taxes and a credit entry to the Cash or Bank Account to complete the transaction. The object is to withhold taxes on behalf of the dividend recipient and the company is to then ensure that the taxes are paid to the Tax Authority.
The criteria that determine whether a dividend is classified as qualified or ordinary include the type of stock the dividend is paid on, the length of time the stock has been held, and the tax status of the company paying the dividend.
Under section 10(34) dividend form a domestic company OS exempt.
Dividend of 164 is the maximum tax on the dividend income that will be effected on 31st December.
Tax is the first priority of payment that's why dividend is paid on income after tax basis which is dividable to shareholders.
To receive a loan stock dividend, you must own shares of the company that issues the dividend. The company will announce the dividend payment date, and you will receive the dividend in the form of additional shares of stock or cash, depending on the company's policy.
U/s 10(34) of income tax, dividend mentioned u/s 115o are exempt from payment of income tax thereon. section 115o includes both preferred and equity dividend RECEIVED FROM INDIAN COMPANY.