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of <h1>Companies Can Declare Dividends Beyond Profits; Taxable in Declaration Year Per Income-tax Act, 1961.</h1> The Companies (Temporary Restrictions on Dividends) Amendment Act, 1975, allows companies to declare dividends exceeding distributable profits, payable after two years in two equal installments with 8% annual interest. The Income-tax Act, 1961, applies to these dividends, making them taxable in the declaration year, not the payment year. Shareholders receive interest due to their accrued right to the dividend upon declaration. Tax credit is given in the declaration year, and taxpayers are not in default for outstanding taxes on deferred dividends until 35 days after they become payable or transferred. This clarification is for tax officers' awareness.
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