Question

Share capital of a company consists of

Rs. 60,00,000 - 7% Preference share capital Rs. 80,00,000- Equity share capital For the year ended March 31, 2018 the Board of directors recommend a dividend of 15% on equity share capital Profits after tax for 2017-18 are Rs. 50,00,000 Dividend Distribution Tax rate- 20% inclusive of surcharge and cess Calculate total dividend payable by the company on Preference and Equity share capital and Dividend Distribution Tax payable.

Answer 1

Answer,

Note #1: Basic Informations

a) 7% Preference Share Capital - Rs.60,00,000

b) Equity Share Capital - Rs.80,00,000

c) Equity Dividend @ 15%

d) Profit After Tax for 2017-18 - Rs.50,00,000

e) Dividend Distribution Tax (DDT) @ 20% ( Inclusive of Surcharge and Cess)

Note #2 : Profit Statement

Particulars	Amount
Profit After Tax	5,000,000
Less:Preference Dividend(60,00,000 *7%)	(420,000)
Less:Equity Dividend (8000000*15%)	(1,200,000)
Retained earnings	3,380,000

Note #3 : Computation of Total Dividend Payable

a) Preference Dividend :Rs.4,20,000

b)Equity Dividend :Rs.12,00,000

c)Total Dividend (a+b) :Rs.16,20,000

Note #4 : Calculation of Dividend Distribution Tax (DDT) Payable @ 20%

As per Section 115-O of Income Tax Act 1961,DDT shall be calculate as follows,

a)Total Dividend Payable : Rs.16,20,000

b)Gross Dividend (16,20,000/(100-20) *100) : Rs.20,25,000

c) Therefore DDT @ 20% : Rs.4,05,000 ( Rs.20,25,000 *20%)