When does the dividend income accrue or arise?
1. Dividend:dividend means amount paid to or received by a shareholder in proportion to hisshareholding in a company out of total sum so distributed.
2. DeemedDividends [section 2(22)] : The following distributions by a company to itsshareholders are included in “dividend” –
a) Anydistribution of accumulated profits, whether capitalized or not, if suchdistribution entails the release of all or any part of the assets of thecompany.
Issue ofbonus shares to equity shareholders isn’t dividend, as there is no release of assets.But if the bonus shares are redeemed (in case such bonus shares are preferenceshares), there will be release of assets and therefore, it would constitutedividend at the time of redemption.
b) Anydistribution of – 1) Debentures, debenture – stock, or deposit certificates inany form, whether with or without interest and 2) bonus shares to itsP’shareholders; to the extent to which the company possesses accumulatedprofits, whether capitalized or not.
c) Anydistribution made on liquidation, to the extent to which the distribution isattributable to the accumulated profits of the company immediately before itsliquidation, whether capitalized or not.
Concept of Dividends, Deemed dividends
CS Professional Programme Tax Notes
CS Executive Programme Tax Notes
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