Section 115BBDA of ITA, 1961 : Section 115Bbda: Tax On Certain Dividends Received From Domestic Companies

Explanation using Example

Imagine Mr. Sharma, a resident of India, receives dividends from various domestic companies amounting to ₹15 lakh in a financial year. According to Section 115BBDA of the Income-tax Act, 1961, Mr. Sharma's income from dividends exceeds ₹10 lakh, which triggers the application of this section.

Mr. Sharma must calculate his tax liability in two parts:

• (a) First, he calculates the tax on the ₹5 lakh (the amount exceeding ₹10 lakh) at a flat rate of 10%, which amounts to ₹50,000.
• (b) Then, he computes the tax on his remaining income (excluding the ₹15 lakh from dividends) as per the applicable income tax slabs.

Moreover, when calculating his taxable income from dividends, Mr. Sharma cannot deduct any expenses or set off any losses against this dividend income, as per subsection (2) of Section 115BBDA.