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

Meghna Pharma Ltd. declared an interim dividend on 28 March 2027. The dividend amount was unconditionally made available to Mr. Raghav, a member entitled to it, on 5 April 2027. Mr. Raghav is a resident individual. Under section 7 of the Income-tax Act, 2025, in which tax year is the interim dividend deemed to be his income, taking the tax year ending 31 March 2027 as the earlier year?

The interim dividend is income of the tax year ending 31 March 2028. Section 7(2)(b) treats an interim dividend as income of the year in which the company unconditionally makes the amount available to the entitled member. That happened on 5 April 2027, not on the 28 March 2027 declaration date.

  1. AThe tax year ending 31 March 2027, because the dividend was declared in it
  2. BThe tax year ending 31 March 2028, because the amount was unconditionally made available to him in itCorrect
  3. CThe tax year in which the company's annual general meeting approves the dividend
  4. DHalf in each of the two tax years

Explanation

Section 7(2)(b) provides that an interim dividend is deemed to be the income of the tax year in which the amount is unconditionally made available by the company to the member entitled to it. That date is 5 April 2027, which falls in the tax year ending 31 March 2028. The declaration date of 28 March 2027 is relevant only to final dividends under section 7(2)(a).

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