Dividend Income & Trade business Profession or Vocation By : R. Anojah N.Kayathri S.Induja

Dividend Income 2

Dividend is a share of profits of the company paid to its shareholder in the form of: Money or an order to pay money or Shares in any other company or Debentures in that company or in any other company Scrip dividend or dividend in specie Buy back of shares The amount of capital returned / distributed after bonus issue 3

 Dividends may not include: Bonus shares A payment of reduction in capital 4

Dividend Tax  All resident company (other than unit trust or mutual fund ) are liable to pay dividend tax at the rate of 10% of Gross dividend distributed out of profits of any year.  That dividend can’t be in the form of shares and debentures. 5

Exemption of dividend  Dividend paid to unit trust or mutual fund  Dividend received on shares held abroad  Dividend paid by a company out of exempt profits  Dividend paid by a BOI company To any persons within the tax holiday period or + 1 year thereafter To a non- resident person 6

Statement of Particulars  The Dividend warrant counterfoil included the following: The gross amount which after deductions of tax corresponds to the net amount actually paid. Tax deduction at source Net dividend paid The composition of the gross dividends such as dividend outs of dividend received, exempt income & other profits and income. 7

Ascertainment of income from dividend the tax deducted are entitled for tax credits If received by person (individual) the tax is already been deducted If received by companythe tax is final If any person received as a business receipt 8

Deemed Dividend Tax Distributable Profits Book profitxxxx Less Assets required (cost) (xxx) Tax liability(xxx) Revaluation profit(gain) (xxx) Add Depreciation charged xxx Revaluation lossxxx Distributable Profitsxxxx 9

Deemed Dividend Tax With effect from Note 01 Distributable profits * 1/3xxx Dividend paid(xx) Excessxxx If Dividend paid = 10% of distributable profitsNo D.D.Tax If Dividend paid > 10% of distributable profitsNo D.D.Tax If Dividend paid < 10% of distributable profitsNote 01 10

Trade, Business, Profession or Vocation 11

Why trade is different from isolated transaction? Profit making motive Alteration of subject matter Nature of the assets The intension of acquisitions 12

How to ascertain profits and income IncomeExpense Exclude income from other sources Deduct allowable expenses Exclude exempt profits Add disallowable expenses 13

Computation of profits from Trade, Business,Profession or Vocation Section 25 - deals with allowable expenditure Section 26 - deals with disallowable expenditure 14

Section 25 - Allowable Expenditure a)Expenses as well as outgoings are deductible. b)Expenses & outgoings can be claimed only if they are incurred. (Accrual basis) c)Expenses & outgoings should be deductible only if they are incurred in the production of income. 15

Bad debts Bad debts incurred Bad debts Trade debtsNon trade debts Provisions Written off SpecificGeneral Allowed Not allowed Allowed Not allowed 16

on bank loan or an overdraft paid (production of income ) Interest (Expenses) Interest paid On other operating assets On loans not utilized for business Allowed Disallowed 17

ETF / EPF Contribution If approved or regulated provident, pension or Savings fund are Allowed. (but maximum of 25% of total salary ) 18

Payment to Employees Lump sum payment in lieu of pension- Allowed Compensation for the loss of office- Allowed Salaries and wages- Allowed Payment for technical training of employees - Allowed 19

Retiring of Gratuity Gratuity ProvisionPaid Disallowed Allowed 20

21 Q & A

Thank you !! 22