Dividend tax deduction requires domestic companies to withhold before distribution on all declared dividends, including preference dividends.

Section 393(1), Table serial number 7, requires a domestic company declaring any dividend, including dividend on equity shares and preference shares, to deduct tax at source at a uniform rate of 10 per cent. No threshold exemption applies. Tax must be deducted before any distribution or payment of dividend, rather than under the general timing rule based on credit or payment. The domestic company declaring the dividend bears the responsibility for withholding tax.

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