Taxation of Dividend and Deemed Dividend

Dividend taxation: dividends taxable in investors' hands from FY2026 27, with broad dividend and deemed dividend definitions.

From FY 2026 27 dividends are taxable in the hands of investors. The term 'dividend' (s.2(40)) covers distributions of accumulated profits as assets, debentures/bonus shares, liquidation and capital reduction distributions, buyback payments, and deemed dividends from loans/advances to significant shareholders or related concerns. Deemed dividend provisions treat specified loans/advances by closely held or unlisted companies as dividend to the extent of accumulated profits. Domestic companies may claim deductions for inter corporate dividends redistributed to shareholders under the Section 148/80M rules, subject to timing and single year restrictions.