Clarification - Dividend Tax Payment Assessment year

[Samit Banerjee]

Dividend Tax Payment Assessment year confusion:- Annual Dividend for a Pvt Ltd company will be declared in the AGM on 30.09.2009. for the financial year 2008-2009. Dividend tax has to be paid after that. Now in the income tax challan what should be the assessment year ? should it be 2009-10 or should it be 2010-11. Dividend will be paid for the financial year 2008-2009 but declared in the financial year 2009-10.

[Rama Krishana]

Financial Year (Previous Year) is the year in which the happening of an even in which tax liability is arisen. Since the tax liability is arising during the previous year 2009-10 (i.e. Assessment year 2010-2011), you should mention the assessment year accordingly as 2010-2011. Sub section 1A of section 115O is clear that it is related to happening of an event. Moreover, accumulated profit can be used to distribute the dividend. It not necessary it must be related to immediate previous year's profit.

[Samit Banerjee]

Thank you Mr Ramakrishana. My confusion got cleared. Thanks a lot.

AI Summary

Dividend tax liability arises in the year of declaration/payment, so the subsequent assessment year must be used. Tax liability for a dividend arises in the year in which the dividend is declared or paid, so the assessment year to be entered for dividend tax corresponds to the assessment year following the year of declaration/payment. The provision links liability to the declaration/payment event rather than to the specific financial year of the underlying profits, and accumulated profits may be used without affecting the year of liability.