TaxTMI 
TaxTMI 
17 Oct 2026 
Abbreviations used:
ITA 1961 or 61 Act - The income-tax Act, 1961
ITA 2025 or 25 Act - The income-tax Act, 2025
ITR 1962 or 62 Rules - Income Tax Rules 1962
ITR 2026 Or Rules 2026- Income-tax rules 2026
PY - Previous year in ITA 1961
AY- Assessment year in ITA 1961.
TY - Tax year in ITA 2025
Intercorporate dividend:
Importance of this article also lies in reminding for possible declaration of dividends to claim deduction and also about last date approaching fast. One more aspect is also covered to make a case for allowable deduction even if dividend is paid out of current years dividend earning. Reasoning for the same are discussed after the table.
In the table below comparison is made for corresponding provisions.
| From ITA 2025 | From ITA 1961 | Remarks |
| 148. Deduction in respect of certain inter-corporate dividends. | 1[Deduction in respect of certain inter-corporate dividends.
| Same except style about Section number. |
| (1) If the gross total income of a domestic company in any tax year includes any income by way of dividends from-- | 80M. (1) Where the gross total income of a domestic company in any previous year includes any income by way of dividends from | Same effect, difference is due to changed style |
| {(a) any other domestic company; or | {any other domestic company | Eligible dividends are similar in both |
| (b) a foreign company; or | or a foreign company |
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| (c) a business trust,} | or a business trust,} |
|
| such domestic company shall be allowed a deduction of an amount equal to so much of the income by way of dividends received from the person mentioned in clause (a) or (b) or (c) as does not exceed the amount of dividend distributed by it at least one month before the due date for filing the return of income under section 263(1). | there shall, in accordance with and subject to the provisions of this section, be allowed in computing the total income of such domestic company, a deduction of an amount equal to so much of the amount of income by way of dividends received from such other domestic company or foreign company or business trust as does not exceed the amount of dividend distributed by it on or before the due date.
| Deduction is mandatory. Therefore, even if by mistake a deduction is not claimed AO may allow based on information available in return and accompanying documents. However, it can b claimed by filing revised return. |
| (2) Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under sub-section (1) in any tax year, no deduction shall be allowed in respect of such amount in any other tax year. | (2) Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under sub-section (1) in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.
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| We find in sub-section (1) which is repeated for comparison: distributed by it at least one month before the due date for filing the return of income under section 263(1). | Explanation.--For the purposes of this section, the expression "due date" means the date one month prior to the date for furnishing the return of income under sub-section (1) of section 139.] |
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Other related provisions are Section 7 of ITA 2025 and S.7 and 8 of ITA 1961 relating to dividend accrued. Readers can refer another article published on 10.10.2026 on this website titled Income tax Act of 2025 and 1961 about income including dividend deemed to be received under two enactments- an analysis.
Due date for filing of Return for AY 2026-27 in case of companies, having audit requirements, has been extended to 20.11.2026.
Therefore, to claim deduction u.s. 80M, companies can distribute dividend by 19.10.2026.
Expression 'any previous year' is wider:
In ITA 1961 the expression used is 'any previous year' is wider then 'previous year'. Any previous year can in context of the above provision include PYE 31.03.2026 and also current previous year / tax year running from 01.04.2026. Therefore, a company can pay dividend against dividend received in both years. To be on safe side from dividend already received or accrued till declaration of dividend by company say up to 19.10.2026. However, double deduction has to be avoided. Therefore, if a dividend is also paid out of dividend received during PY/TY 26-27 ( from 01.04.2026 to say 19.10.2026) then to that extent deduction shall not again be allowed in TY 26-27.
Expression 'any tax year' is wider:
In ITA 2025 expression used is 'Any tax year' is similarly wider than 'tax year'.
Gross dividend vis a vis net dividend income:
If any expenses are incurred to earn dividend, then to be on safe side reasonable expenses should be deducted to determine eligible dividend income (dividedn income which goes in gross total income)
Style of drafting of provisions:
There is significant change in style of writing of provisions under two enactments, including for headings and numbering of section, sub-sections and clauses. Though any difference might not have been intended, but while applying rules of interpretations there can be circumstances to distinguish provisions and need of a fresh finality in interpretation of provisions of ITA 2025 and precedence in ITA 1961 may not be binding but may be considered persuasive.
Let us hope that there will be reduced litigation, however, in tax matters more than 90 percent litigation is initiated by tax officers and tax payer has to contest to save his hard-earned money from levy of wrongful tax and interest and penalties by tax officers. Old section 80M and similar other provisions also faced lot of litigation. Litigation on S.14A about earnings from dividend and amount dis allowable has also faced lot of litigation and litigation is still continuing even after several judgments of SC and also HC and tribunal which are not challenged.