Section 115-O:
Tax on distributed profits of domestic companies.
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(1) Notwithstanding anything
contained in any other provision of this Act and subject to the provisions of this section, in addition to the
income-tax chargeable in respect of the total income of a domestic company for any assessment year, any
amount declared, distributed or paid by such company by way of dividends (whether interim or
otherwise) on or after the 1st day of April, 2003, whether out of current or accumulated profits shall be
charged to additional income-tax (hereafter referred to as tax on distributed profits) 3
at the rate of fifteen
per cent.
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Provided that in respect of dividend referred to in sub-clause (e) of clause (22) of section 2, this
sub-section shall have effect as if for the words “fifteen per cent.”, the words “thirty per cent.” had been
substituted;
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(1A) The amount referred to in sub-section (1) shall be reduced by,—
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(i) the amount of dividend, if any, received by the domestic company during the financial year,
if such dividend is received from its subsidiary and,—
(a) where such subsidiary is a domestic company, the subsidiary has paid the tax which is
payable under this section on such dividend; or
(b) where such subsidiary is a foreign company, the tax is payable by the domestic company
under section 115BBD on such dividend:
Provided that the same amount of dividend shall not be taken into account for reduction more
than once;
(ii) the amount of dividend, if any, paid to any person for, or on behalf of, the New Pension
System Trust referred to in clause (44) of section 10.
Explanation.—For the purposes of this sub-section, a company shall be a subsidiary of another
company, if such other company, holds more than half in nominal value of the equity share capital of the
company.
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(1B) For the purposes of determining the tax on distributed profits payable in accordance with this
section, any amount by way of dividends referred to in sub-section (1) as reduced by the amount referred
to in sub-section (1A) hereafter referred to as net distributed profits, shall be increased to such amount
as would, after reduction of the tax on such increased amount at the rate specified in sub-section (1), be
equal to the net distributed profits.
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Provided that this sub-section shall not apply in respect of dividend referred to in sub-clause (e) of
clause (22) of section 2.
(2) Notwithstanding that no income-tax is payable by a domestic company on its total income
computed in accordance with the provisions of this Act, the tax on distributed profits under
sub-section (1) shall be payable by such company.
(3) The principal officer of the domestic company and the company shall be liable to pay the tax on
distributed profits to the credit of the Central Government within fourteen days from the date of—
(a) declaration of any dividend; or
(b) distribution of any dividend; or
(c) payment of any dividend,
whichever is earliest.
(4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax
in respect of the amount declared, distributed or paid as dividends and no further credit therefor shall be
claimed by the company or by any other person in respect of the amount of tax so paid.
(5) No deduction under any other provision of this Act shall be allowed to the company or a
shareholder in respect of the amount which has been charged to tax under sub-section (1) or the tax
thereon.
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(6) Notwithstanding anything contained in this section, no tax on distributed profits shall be
chargeable in respect of the total income of an undertaking or enterprise engaged in developing or
developing and operating or developing, operating and maintaining a Special Economic Zone for any
assessment year on any amount declared, distributed or paid by such Developer or enterprise, by way of
dividends (whether interim or otherwise) on or after the 1st day of April, 2005 out of its current income
either in the hands of the Developer or enterprise or the person receiving such dividend 10
*** :
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Provided that the provisions of this sub-section shall cease to have effect from the 1st day of June,
2011.
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(7) No tax on distributed profits shall be chargeable under this section in respect of any amount
declared, distributed or paid by the specified domestic company by way of dividends (whether interim or
otherwise) to a business trust out of its current income on or after the specified date:
Provided that nothing contained in this sub-section shall apply in respect of any amount declared,
distributed or paid, at any time, by the specified domestic company by way of dividends (whether interim
or otherwise) out of its accumulated profits and current profits up to the specified date.
Explanation.—For the purposes of this sub-section,—
(a) “specified domestic company” means a domestic company in which a business trust has
become the holder of whole of the nominal value of equity share capital of the company (excluding
the equity share capital required to be held mandatorily by any other person in accordance with any
law for the time being in force or any directions of Government or any regulatory authority, or equity
share capital held by any Government or Government body);
(b) “specified date” means the date of acquisition by the business trust of such holding as is
referred to in clause (a).
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(8) Notwithstanding anything contained in this section, no tax on distributed profits shall be
chargeable in respect of the total income of a company, being a unit of an International Financial Services
Centre, deriving income solely in convertible foreign exchange, for any assessment year on any amount
declared, distributed or paid by such company, by way of dividends (whether interim or otherwise) on or
after the 1st day of April, 2017, out of its current income, either in the hands of the company or the person
receiving such dividend.
Explanation.—For the purposes of this sub-section,—
(a) “International Financial Services Centre” shall have the same meaning as assigned to it in
clause (q) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005);
(b) “unit” means a unit established in an International Financial Services Centre, on or after the
1st day of April, 2016;
(c) “convertible foreign exchange” means foreign exchange which is for the time being treated
by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign
Exchange Management Act, 1999 (42 of 1999) and the rules made thereunder.
Notes:
1. Ins. by s. 40, ibid. (w.e.f. 1-6-1997).
2. Subs. by Act 32 of 2003, s. 55, for sub-section (1) (w.e.f. 1-4-2003). Earlier sub-section (1) was amended by Act 10 of
2000, s. 53 (w.e.f. 1-6-2000), Act 14 of 2001, s. 55 (w.e.f. 1-6-2001), and Act 20 of 2002, s. 53 (w.e.f. 1-4-2003).
3. Subs. by Act 22 of 2007, s. 35, for “at the rate of twelve and one-half per cent.” (w.e.f. 1-4-2007).
4. Ins. by Act 13 of 2018, s. 40 (w.e.f. 1-4-2018).
5. Subs. by Act 33 of 2009, s. 47, for sub-section (1A) (w.r.e.f. (1-4-2009). Earlier sub-section (1A) was inserted by
Act 18 of 2008, s. 24 (w.e.f. 1-4-2008).
6. Subs. by Act 17 of 2013, s. 30, for clause (i) (w.e.f. 1-6-2013).
7. Ins. by Act 25 of 2014, s. 41 (w.e.f. 1-10-2014).
8. Ins. by Act 13 of 2018, s. 40 (w.e.f. 1-4-2018).
9. Ins. by Act 28 of 2005, s. 27 and the Second Schedule (w.e.f. 10-2-2006).
10. The words “not falling under clause (23G)” omitted by Act 21 of 2006, s. 25 (w.e.f. 1-4-2007).
11. Ins. by Act 8 of 2011, s. 20 (w.e.f. 1-6-2011).
12. Ins. by Act 28 of 2016, s. 57 (w.e.f. 1-6-2016).
13. Ins. by s. 57, ibid. (w.e.f. 1-4-2017).