Dividend

A dividend is a distribution of a portion of a company's retained earnings or current-year profits to its shareholders, approved by the Board of Directors and, in the case of final dividends, by the shareholders in a general meeting. Dividends can be paid as interim dividends (declared by the Board between two AGMs) or final dividends (declared at the AGM). The Companies Act, 2013 permits dividends to be paid in cash, by issue of fully-paid bonus shares, or through distribution of specific assets. The rate of dividend is expressed as a percentage of the face value of shares — for example, a 50% dividend on ₹10 face-value shares pays ₹5 per share. Under the Income Tax Act, dividends are taxed in the hands of shareholders at their slab rate, with the company paying Dividend Distribution Tax (DDT) at 15% (plus surcharge and cess) before remitting the balance. From FY 2020-21, the DDT regime was replaced — companies no longer pay DDT, and dividends are now taxed directly in the hands of recipients with a TDS deduction at 10% for dividends exceeding ₹5,000. Listed companies must also comply with SEBI's dividend distribution norms and disclose dividend policy in the annual report.