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CMA Final · Direct Tax Laws and International Taxation · Interest and Fees

Under the Income-tax Act, 2025, a foreign company's total income includes dividend (other than from an International Financial Services Centre unit) of Rs 2,00,000 and dividend of Rs 1,00,000 received from a unit in an International Financial Services Centre. Applying the special rates of section 207(1), what is the tax on these two dividends, before surcharge and cess?

The tax is Rs 50,000. Under section 207(1), ordinary dividend of Rs 2,00,000 bears 20%, giving Rs 40,000, while dividend from an IFSC unit of Rs 1,00,000 bears 10%, giving Rs 10,000. The two amounts add up to Rs 50,000 before surcharge and cess.

  1. ARs 50,000Correct
  2. BRs 40,000
  3. CRs 60,000
  4. DRs 30,000

Explanation

Section 207(1) taxes ordinary dividend at 20% and dividend from an IFSC unit at 10%. Tax = 2,00,000 x 20% = 40,000 plus 1,00,000 x 10% = 10,000, total Rs 50,000. Rs 60,000 wrongly applies 20% to both dividends.

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