Rationalization of taxation of income by way of dividend

Under the existing provisions of section 115BBDA, income by way of dividend in excess of Rs. 10 lakh is chargeable to tax at the rate of 10% on gross basis in case of a resident individual, Hindu undivided family or firm.

With a view to ensure horizontal equity among all categories of tax payers deriving income from dividend, it is proposed to amend section 115BBDA so as to provide that the provisions of said section shall be applicable to all resident assessees except domestic company and certain funds, trusts, institutions, etc.

This amendment will take effect from 1st April, 2018 and will, accordingly apply in relation to the assessment year 2018-19 and subsequent years.

[Clause 44]

Extract of relevant clause from Finance Bill, 2017

Amendment of section 115BBDA.

44. In section 115BBDA of the Income-tax Act [as inserted by section 52 of the Finance Act, 2016], 28 of 2016.
with effect from the 1st day of April, 2018,—

(i) in sub-section (1), for the words “an assessee, being an individual, a Hindu undivided family or a firm”, the words “a specified assessee” shall be substituted;

(ii) for sub-section (3), the following Explanation shall be substituted, namely:— 10

Explanation.––Forthe purposes of this section,—

(a) “dividend” shall have the meaning assigned to it in clause (22) of section 2 but shall not include sub-clause (e) thereof;

(b) “specified assessee” means a person other than,—

(i) a domestic company; or 15

(ii) a fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23G) of section 10; or

(iii) a trust or institution registered under section 12AA.’.

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June 2021