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CA Final · Direct Tax Laws & International Taxation · Incomes which do not form part of Total Income

Godavari Textiles Ltd declared an interim dividend on 20 March 2027, and its members' accounts were not credited then. The amount was unconditionally made available to the members on 5 April 2027. Under section 7 of the Income-tax Act, 2025, in which tax year is the dividend deemed to be the income of a member for inclusion in total income?

The dividend is income of tax year 2027-28. Under section 7(2)(b), an interim dividend is deemed to be the member's income in the year it is unconditionally made available to the member. That happened on 5 April 2027, which falls in tax year 2027-28, not the declaration year.

  1. ATax year 2026-27, being the year of declaration
  2. BTax year 2027-28, being the year the amount was unconditionally made available to the memberCorrect
  3. CTax year 2026-27, because the board resolution was passed in that year
  4. DSpread equally over tax years 2026-27 and 2027-28

Explanation

Section 7(2)(b) provides that an interim dividend is deemed to be the income of the tax year in which it is unconditionally made available by the company to the member entitled to it. That date is 5 April 2027, which falls in tax year 2027-28 (1 April 2027 to 31 March 2028). The declaration date of 20 March 2027 decides nothing for interim dividend.

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