Now you can pay advance tax due on dividend after receiving it... with no interest charge.
Now you can pay advance tax due on dividend after receiving it... with no interest charge.
Advance tax relief on Dividend
Government has relaxed the advance tax payment system on dividends by excluding them from section 234C interest liability calculations. This welcome amendment reduces tax ambiguity and ingenuity.
You pay advance tax instalments according to section 208 of the Income tax Act.
Your laxity in paying advance tax triggers section 234C "interest on tax" and you end up paying interest.
Generally tax counsels project an income forecast relying upon history and calculate advance tax instalments.
Yet their calculations misfire when it comes to calculating windfalls like capital gains, dividends.
So, government carefully permitted its taxpayers to reduce capital gains from their income while calculating their advance tax liability.
Few years earlier, when government made dividend taxable, it didn't exclude dividend from advance tax calculations. Considering that dividend has a similar uncertain nature as capital gains, this year government has allowed its taxpayers to reduce dividend while calculating their advance tax liability.
Important: You should remember adding this realised dividend to your income projections while calculating future advance tax instalments.
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