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

Neha, a shareholder, is declared an interim dividend by Zenith Ltd on 20 March, but the company makes the amount unconditionally available to her only on 5 April, in the next tax year. Under section 7 of the Income-tax Act, 2025, in which tax year is this dividend deemed to be her income?

The dividend is income of the tax year containing 5 April. Section 7(2)(b) deems an interim dividend to be income in the year in which the company unconditionally makes the amount available to the member, not the year of declaration.

  1. AThe tax year in which it was declared on 20 March
  2. BThe tax year in which the amount is unconditionally made available, which is the year of 5 AprilCorrect
  3. CThe tax year in which the annual general meeting is held
  4. DBoth tax years equally, half in each

Explanation

Section 7(2)(b) deems an interim dividend to be income of the tax year in which the amount is unconditionally made available by the company to the entitled member. Declaration date is relevant only to other dividends under section 7(2)(a). Here that is 5 April.

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