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Home Acts & Rules Bill Bills FINANCE BILL, 2011 Chapters List Chapter III - Part 1 Direct Taxes - Income Tax This

Clause 16 - Insertion of new section 115BBD- Tax on certain dividends received from foreign companies - FINANCE BILL, 2011

FINANCE BILL, 2011
Chapter III - Part 1
Direct Taxes - Income Tax
  • Contents

Insertion of new section 115BBD

16. After section 115BBC of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2012, namely:-

 Tax on certain dividends received from foreign companies

      '115BBD. (1) Where the total income of an assessee, being an Indian company, for the previous year relevant to the assessment year beginning on the 1st day of April, 2012  includes any income by way of dividends declared, distributed or paid by a subsidiary foreign company, the income-tax payable shall be the aggregate of-

(a) the amount of income-tax calculated on the income by way of such dividends, at the rate of  fifteen per cent.; and

(b) the amount of income-tax with which the assessee would have been chargeable had its total income been reduced by the aforesaid income by way of dividends.

(2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing its income by way of dividends referred to in sub-section (1).

(3) In this section,-

(i) "dividends" shall have the same meaning as is given to "dividend" in clause (22) of section 2 but shall not include sub-clause (e) thereof;

(ii) "subsidiary foreign company" means a foreign company in which the Indian company holds  more than half in nominal value of the equity share capital of the company.'.

 



 

Notes on Clauses:

Clause 16 of the Bill seeks to insert a new section 115BBD in the Income-tax Act relating to tax on certain dividends received from foreign companies.

Under the existing provisions of the Income-tax Act, dividend received from foreign companies is taxable in the hands of the recipient at his applicable marginal rate of tax. Therefore, in case of companies who receive foreign dividend, such dividend is taxable at the rate of thirty per cent. plus applicable surcharge and cess.

Sub-section (1) of the aforesaid new section seeks to provide that where the total income of an assessee, being an Indian company, for the previous year relevant to the assessment year beginning on the 1st day of April, 2012,  includes any income by way of dividends declared, distributed or paid by a subsidiary foreign company, the income-tax payable shall be the aggregate of the amount of income-tax calculated on the income by way of such dividends at the rate of fifteen per cent. and the amount of income-tax with which the assessee would have been chargeable had its total income been reduced by the amount of aforesaid income by way of dividends.

Sub-section (2) of the aforesaid new section provides that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Income-tax Act in computing its income by way of dividends.

Sub-section (3) of the aforesaid new section seeks to define the expressions “dividends” and “subsidiary foreign company”.

This amendment will take effect from 1st April, 2012 and will, accordingly, apply in relation to the assessment year 2012-2013.

 
 
 
 

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