Section 115-O(1)

Section 115-O(1) — the law in short

What the courts have decided on section 115-O(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Statutory position — s.115-O: the dividend distribution tax charge, the fifteen per cent rate, the thirty per cent proviso for s.2(22)(e), and the s.115-O(1B) grossing-up CBDT Circulars & InstructionsCuts both waysSuperseded by amendment
  My company paid dividend distribution tax for a year before 2020 and the Assessing Officer is now recomputing it. What does s.115-O actually charge, at what rate, and on what base?
  Section 115-O charges a domestic company to additional income-tax, called tax on distributed profits, on any amount declared, distributed or paid by way of dividends (whether interim or otherwise) on or after 1 April 2003 but on or before 31 March 2020, whether out of current or accumulated profits, at the rate of fifteen per cent. A proviso to sub-section (1) makes that rate thirty per cent for a deemed dividend under s.2(22)(e), and sub-section (1B) requires the net distributed profits to be grossed up — increased to such amount as would, after reduction of the tax on the increased amount at the sub-section (1) rate, be equal to the net distributed profits — so the effective burden is higher than the headline fifteen per cent.
• Statutory position — how DDT was abolished: the end-date written into s.115-O(1), s.115R(2) and s.115BBDA(1), and the withholding that replaced it under s.194 and s.194K CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  Everyone says DDT was abolished in 2020. Which provision actually did it, from what date, and what withholding took its place on dividend and on mutual fund income?
  No section was repealed. The abolition was done by writing an end-date into the charging words themselves: s.115-O(1) now charges only dividend declared, distributed or paid 'on or after the 1st day of April, 2003 but on or before the 31st day of March, 2020'; s.115R(2) charges only income distributed by a specified company or Mutual Fund 'on or before the 31st day of March, 2020'; and s.115BBDA(1) reaches only dividend 'declared, distributed or paid by a domestic company or companies on or before the 31st day of March, 2020'. Dividend then fell to be taxed in the shareholder's hands, with withholding revived under s.194 for dividend paid by a company and s.194K for income in respect of mutual fund units, both at ten per cent.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.