Swadeshi Ltd. an Indian company receives the following dividend income during the previous year 2022-23 : From share held in Alfa Inc., a foreign company, in which it holds 25% of nominal value of equity share capital: ₹

Computation of Total Income of Swadeshi Ltd. for AY 2023-24 Particulars Amount (₹) Profits and gains of business or profession 41,00,000 Income from other sources Dividend from Alfa Inc. (Foreign Company) 2,25,000 Less: Interest expense (restricted to 20% of dividend income) (45,000) Net Dividend from Alfa Inc. 1,80,000 Dividend from Beta Inc. (Foreign Company) 1,50,000 Less: Interest expense (restricted to 20% of dividend income) (20,000) Net Dividend from Beta Inc. 1,30,000 Dividend from Bharat Ltd. (Indian Company) 3,00,000 Less: Interest expense (restricted to 20% of dividend income) (3,00,000 * 20% = 60,000) (60,000) Net Dividend from Bharat Ltd. 2,40,000 Total Income from Other Sources 5,50,000 Total Income 46,50,000 Computation of Tax Liability of Swadeshi Ltd. for AY 2023-24 Particulars Amount (₹) Tax @ 25% on ₹46,50,000 (Refer Working Note 3) 11,62,500 Add: Surcharge [Nil as total income is less than ₹50 lakhs] Nil Add: Health and Education Cess @ 4% on ₹11,62,500 46,500 Total Tax Liability 12,09,000 Working Notes: Dividend from Foreign Companies (Alfa Inc. and Beta Inc.): Dividend received by an Indian company from a specified foreign company (in which minimum 26% or more share is held by the Indian Company) was eligible for a concessional tax rate @15% under section 115BBD. However, this section is not applicable with effect from A.Y. 2023-24. Accordingly, net dividend received by an Indian Company from all foreign companies would be chargeable to tax at normal rates applicable to such company. Dividend from Indian Company (Bharat Ltd.): Under section 56(2)(i), with effect from 1-4-2021, any dividend received from an Indian Company is Taxable under 'Income from other sources'. However, deduction of interest expense incurred against the dividend is allowed as expenses. The deduction should not exceed 20% of the dividend income so received. No other expenditure like commission or salary expense incurred for earning the dividend income is allowed. Applicable Tax Rate for Swadeshi Ltd.: If a domestic company having turnover during the previous year 2020-21 is upto ₹400 crores and it does not opt for section 115BAA/115BAB, then it shall be chargeable to tax at the rate of 25% plus applicable surcharge and health & education cess. Since Swadeshi Ltd.'s turnover during PY 2020-21 was ₹380 crore (which is less than ₹400 crore) and it has not opted for concessional regimes, the tax rate of 25% applies.