Question

1 .Under what circumstances is a dividend nontaxable to a shareholder recipient?
2. On July 1, 2019, Rene a cash basis taxpayer purchased 500.000 $ of the newly issued bonds of Acce Corporation for $ 452.260.
The 10 year semi annual bonds carry an interest rate of 8 % and were sold to yield 9.5 %. What amount of interest income must Rene report in 2019, 2020, 2021?

Answer 1

Circumstances dividend nontaxable to a shareholder recipient

1. Dividend from domestic company is not taxable in the hands of shareholder on which dividend distribution tax (DDT) is paid by the company.

2. If the dividend received from domestic company is above 10 lac from a domestic company the same is taxable in excess of 10 lac

3. Deemed dividends under section 2(22) is not taxable in the hands of the recipient.

Date	Particulars	Amount
31 Dec 19	Interest= FV*8%*1/2               = 500*8%*1/2               =40*1/2               =20	20
Income to be Reported in 2019	20
30 Jun 20	Interest= FV*8%*1/2	20
31 Dec20	Interest= FV*8%*1/2	20
Income to be Reported in 2020	40
30 Jun 21	Interest= FV*8%*1/2	20
31 Dec21	Interest= FV*8%*1/2	20
Income to be Reported in 2021	40