Tax deduction on dividends to foreign companies: unified withholding rate applied after amendment standardising inter corporate dividend tax treatment.

Amendment removes the preferential dividend deduction for foreign companies receiving dividends from closely held Indian companies, lowering the allowable deduction and producing a uniform effective tax deduction at source of 24.5 per cent on dividends paid by any domestic company to a foreign company for payments after May 28, 1971. Transitional guidance requires shortfalls in withholding for dividends paid April 1-May 28, 1971 to be recovered via assessment where remitted, or by Reserve Bank insistence before remittance where not yet remitted.

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