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Interim dividend means dividend which is paid before Annual General Meeting and finalisation of financial statements. Normally cash rich or profitable companies declare interim dividend
Section 2(35) of the companies Act, 2013 defines dividend as dividend includes interim dividend.
Unlisted public limited companies can declare interim dividend easily by holding board meeting giving 7 days prior notice and make payment. It is worthwhile to note that board resolution can be passed even by circulation, which is not required to be filed with ROC.
Listed companies have to follow Listing Obligation and Disclosure requirement (LODR) Regulation, 2015 as well along with provision of Companies Act.
There are some time sensitive deadlines and tedious process as prescribed under LODR which are as follows:
Sources to pay interim Dividend:
Tax Implication on Interim Dividend/Dividend:
n the past, a dividend distribution tax (DDT) tax was levied on the companies that paid dividends to their shareholders. However, the government abolished this tax in 2020, and till date the dividends are taxed in the hands of the shareholders.
Tax Rates on dividend for the assessee varies according to the category of assessee and the instrument for dividen-+d distribution.
Category of Assessee |
Dividend nature |
Rate of Tax |
Resident |
Dividend received from a domestic company |
As per the normal tax rate which is applicable for the assessee |
NRI |
Dividend on GDR of Indian Company./PSU (purchased in foreign currency) |
10% |
NRI |
Dividend on shares of Indian Company (purchased in foreign currency) |
20% |
NRI |
Any other Dividend income |
20% |
Assessee with Foreign Portfolio Investment (FPI) |
Dividend on securities other than those mentioned in Section 115AB of Income Tax Act |
20% |
Investment Division of offshore banking unit |
Dividend on securities other than Section 115AB of Income Tax Act |
10% |
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