Jyoti Limited of Kolkata is a company in which 70% of the shares are held by Sanjana Limited of Jaipur. Jyoti Limited declared a dividend amounting to ₹40 lakh to its shareholders for the financial year 2017-18 in its An

Tax on distributed profits of domestic companies [Section 115-O of Income Tax Act, 1961]: Notwithstanding anything contained in any other provision of this Act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be charged to additional income-tax (hereafter referred to as tax on distributed profits) at the rate of 15%. The amount referred to in sub-section (1) shall be reduced by the amount of dividend, if any, received by the domestic company during the financial year, if such dividend is received from its domestic subsidiary company and the subsidiary has paid the tax which is payable under this section on such dividend [Section 115-O(1A)]. Grossing up of Distributed Profits: For the purposes of determining the tax on distributed profits payable in accordance with this section, any amount by way of dividends referred to in sub-section (1) as reduced by the amount referred to in sub-section (1A) [hereafter referred to as net distributed profits], shall be increased to such amount as would, after reduction of the tax on such increased amount at the rate specified in sub-section (1), be equal to the net distributed profits Calculation of Dividend Distribution Tax payable by Sanjana Limited Particulars Amount (In Lakhs) Dividend distributed by Sanjana Limited 60 Less: Dividend received from domestic subsidiary company i.e. Jyoti Limited (70% of ₹40 Lakh) (28) Net Distributed Profits 32 Add: Grossing up of Dividend (₹32 lakhs * 100 / (100-15)) 5.65 Gross Dividend 37.65 Additional Income Tax Payable by Sanjana Limited u/s 115-O [15% of ₹37.65] 5.65 Add: Surcharge @ 12% on ₹5.65 lakh 0.68 Tax including surcharge 6.33 Add: Health and Education Cess @ 4% on ₹6.33 lakh 0.25 Tax Liability 6.58