Amendment of section 194.
74. In section 194 of the Income-tax Act,––
(A) for the words “in cash or before issuing any cheque or warrant”, the words “by any mode” shall be substituted;
(B) for the words “at the rates in force”, the words “at the rate of ten per cent.” shall be substituted;
(C) in the first proviso,––
(i) in clause (a), for the words “an account payee cheque”, the words “any mode other than cash” shall be substituted;
(ii) in clause (b), for the words “two thousand five hundred rupees”, the words “five thousand rupees” shall be substituted;
(D) the third proviso shall be omitted.
Notes on Clauses:
Clause 74 of the Bill seeks to amend section 194 of the Income-tax Act relating to dividends.
The said section, inter alia, provides that the principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment in cash or before issuing any cheque or warranty in respect of any dividend or before making any distribution or payment to a shareholder, who is resident in India, of any dividend within the meaning of sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2, deduct from the amount of such dividend, income-tax at the rates in force.
It is proposed to amend the said section so as to bring the payment by any mode within the ambit of that section and also to provide for deduction at the rate of ten per cent. instead of the rates in force.
It is further proposed to amend the first proviso to the said section so as to provide for payment of dividend by the company by any mode and to increase the threshold limit thereof from two thousand five hundred rupees to five thousand rupees.
It is also proposed to consequentially omit the third proviso to the said section.
These amendments will take effect from 1st April, 2020.
