The document discusses dividend, which is the return on investment made in shares of a company paid out of profits. It outlines that shareholders are entitled to a share of profits, preference share dividends are fixed while equity shares vary depending on profits. There are different types of dividends and the dividend policy is an important financial decision. The legal regime for dividends in India is outlined from the Companies Act.

1. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
DIVIDEND AND DIVIDEND
ACT
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
SHELLEY E.
Trademark Department
EMAIL
info@altacit.com
WEBSITE
www.altacit.com

2. INTRODUCTION
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore, • Dividend is the return on the investment made in the
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821 shares (equity or preference) and is paid out of the
BANGALORE
Suite 920, Level 9,
profits of the company.
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
• The shareholders being the owners of the company are
Tel: +91 - 80 - 6546 2400
entitled to get their share of profit in the form of
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
dividend.
Coimbatore - 641018.
Tel: +91 - 422 – 6552921 • While the rate of dividend in case of preference shares
is fixed, the dividend on equity shares varies from year
to year depending upon the profit for the year and the
requirement to get back profits.
• Dividend rate is used for valuation of share and is an
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info@altacit.com
indicator of performance of the company.
WEBSITE
www.altacit.com

3. DIVIDEND
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
• The term dividend refer to that part of divisible
profits among its shareholders.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400 • In other words, it is that portion of the company’s
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
profit which is distributed among its shareholders
Coimbatore - 641018.
Tel: +91 - 422 – 6552921 as a percentage of per value share or at a fixed
rate per share according to the decision of its
board of directors.
EMAIL
info@altacit.com
WEBSITE
www.altacit.com

4. DIFFERENT TYPES OF DIVIDEND
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
• Cash Dividend
• Stock Dividend
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
• Bond Dividend
Tel: +91 - 80 - 6546 2400
COIMBATORE • Property Dividend
BB1, Park Avenue,
• Composite Dividend
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
• Optional Dividend
• Interim Dividend
• Special Dividend
EMAIL
info@altacit.com
WEBSITE
www.altacit.com

5. DIVIDEND POLICY
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
• Dividend Policy is a very significant
BANGALORE
Suite 920, Level 9,
financial decision.
• It determines the divisions of earnings
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
between payments to shareholders and
retained earnings.
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
• If the value of firm is a function of its
dividend- pay- ratio, the dividend policy
will affect directly the firms cost of capital.
EMAIL
info@altacit.com
WEBSITE
www.altacit.com

6. LEGAL REGIME
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road, • Section 205 of the Companies Act:
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821 – Section 205 of the Act regulates the declaration
BANGALORE
Suite 920, Level 9,
and distribution of dividend.
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
– All the companies which have share capital other
Tel: +91 - 80 - 6546 2400
than section 25 companies and make profit are
COIMBATORE
BB1, Park Avenue, bound by law to declare and distribute dividends.
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921 – As per Section 205 of the Companies Act, 1956, a
dividend (including interim dividend) can be paid
out of current profits or profits accumulated of
earlier years.
– However, depreciation for the entire year has to
EMAIL be provided before a dividend is declared or paid.
info@altacit.com
WEBSITE
www.altacit.com

7. CONT.
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
• For this purpose, the Board needs to approve the
provisional financial results (unaudited) and a
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers, working of the profits available for distribution as
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
dividend, post providing for depreciation for the
COIMBATORE full year and amount required to be transferred to
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
reserves as per the Companies.
Tel: +91 - 422 – 6552921
• Sections 205 A, B and C deal with some other
aspects of distribution of dividend such as
establishment of Investor Education and Protection
EMAIL
info@altacit.com Fund, Payment of unpaid and unclaimed dividend
WEBSITE etc.
www.altacit.com

8. Coming into operation of
enactments
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
• Separate bank account needs to be opened and
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821 the amount of dividend will have to be transferred
BANGALORE
Suite 920, Level 9,
to that account. Dividend will have to be remitted
Raheja Towers,
26-27, M G Road, within 30 days of declaration.
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road, • The other procedure of record date/book closure,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921 payment of tax on dividend within 7 days of
declaration, etc. will have to be complied
with.Dividend is also payable out of divisible profits
or out of moneys provided by the Central or any
State Government for the payment of dividend in
EMAIL
info@altacit.com pursuance of a guarantee given by that
WEBSITE Government.
www.altacit.com

9. MODE OF DECLARATION
CHENNAI
3rd Floor, ‘Creative Enclave’,
• Dividend can be declared out of four sources.
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
• Firstly It can be declared out of the profits of the
company for that year arrived at after providing for
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
depreciation in accordance with the provisions of the
26-27, M G Road,
Bangalore - 560 001. Act
Tel: +91 - 80 - 6546 2400
COIMBATORE
Or
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
• secondly, out of the profit of the company for any
Tel: +91 - 422 – 6552921
previous financial year or years arrived at after
providing for depreciation in accordance with those
provisions and remaining undistributed or thirdly, out
of both or lastly, out of the money provided by the
Central Government or a State Government for the
EMAIL
info@altacit.com payment of dividend in pursuance of a guarantee
WEBSITE given by that Government.
www.altacit.com

10. PROHIBITION
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
• A company which has failed to redeem the
Raheja Towers,
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
irredeemable preference shares within the
COIMBATORE stipulated time cannot declare dividend.
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com

11. DECLARATION & DISTRIBUTION
OF DIVIDEND
CHENNAI
3rd Floor, ‘Creative Enclave’,
• The Steps involved in the process of declaration and
distribution of dividend:
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
• Computation of Depreciation
BANGALORE
Suite 920, Level 9,
Raheja Towers,
– Depreciation shall be provided either at the rate
26-27, M G Road,
Bangalore - 560 001. specified in Schedule XIV or any other basis approved by
the Central Government.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road, • Compulsory Transfer of Profits to Reserves
Coimbatore - 641018.
Tel: +91 - 422 – 6552921 – Before declaring the dividend, the some part of the
profit has to compulsorily transferred to the Reserves of
the Company. This amount is based on the proposed
rate of dividend.
– However voluntary transfer of higher percentage to
EMAIL reserves is permitted subject to the conditions
info@altacit.com stipulated in the Act.
WEBSITE
www.altacit.com

12. CNTN…
CHENNAI
3rd Floor, ‘Creative Enclave’, • Board Resolution
148-150, Luz Church Road,
Mylapore, – The most important step in the process is the Board Resolution
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821 for declaration of dividends. Unless the Board recommends the
BANGALORE
payment of dividend, the same cannot be declared at an Annual
Suite 920, Level 9,
Raheja Towers,
General Meeting.
26-27, M G Road,
Bangalore - 560 001. • Annual General Meeting (“AGM”)
Tel: +91 - 80 - 6546 2400
– The item pertaining to declaration of dividend should be
COIMBATORE
BB1, Park Avenue, included in the agenda of the notice for AGM which should be
# 48, Race Course Road,
Coimbatore - 641018. sent to members as well as the creditors. An ordinary resolution
Tel: +91 - 422 – 6552921
is required for declaration of dividend. However shareholders
cannot increase the amount of dividend recommended by the
Board.
• Time Limit for payment of Dividend
– The dividend account should be opened with the company’s
EMAIL bankers and the dividend amount payable should be transferred
info@altacit.com to that account. Within 30 days of the AGM the dividend warrants
WEBSITE should be sent to the shareholders.
www.altacit.com

13. CNTN…
CHENNAI
3rd Floor, ‘Creative Enclave’,
• Transfer to unpaid dividend account
148-150, Luz Church Road,
Mylapore,
– Within 7 days from the date of expiry of 30 days
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
from the date of dividend declaration, the amount
Raheja Towers,
26-27, M G Road, remaining unpaid or unclaimed should be
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400 transferred to the ‘unpaid dividend account’ to be
COIMBATORE
BB1, Park Avenue,
opened in a scheduled Bank.
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
– Dividend which remains unpaid or unclaimed for a
period of 7 years shall be transferred to the
Investor Education and Protection Fund within a
period of 30 days of its becoming due for the
EMAIL
transfer.
info@altacit.com
WEBSITE
www.altacit.com

14. CIRCUMSTANCES UNDER WHICH
DIVIDEND NEED NOT BE PAID
CHENNAI
3rd Floor, ‘Creative Enclave’,
• Where it could not be paid because of operation of
any law;
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
• Where a shareholder has given direction to the
BANGALORE
Suite 920, Level 9,
Raheja Towers,
company regarding payment of dividend and those
26-27, M G Road,
Bangalore - 560 001. directions could not be complied with;
Tel: +91 - 80 - 6546 2400
COIMBATORE
• Where there is a dispute regarding the right to
BB1, Park Avenue,
# 48, Race Course Road, receive the dividend;
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
• Where the dividend has been lawfully adjusted by the
company against any sum due from the shareholders;
and
• Where the dividend could not be paid not due to any
EMAIL
default on part of the company.
info@altacit.com
WEBSITE
www.altacit.com

15. TAX LIMIT
CHENNAI
3rd Floor, ‘Creative Enclave’, • In addition to the income tax chargeable in respect of the
148-150, Luz Church Road,
Mylapore, total income of a company for any assessment year, any
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821 amount declared, distributed or paid by such company by
BANGALORE way of dividends (whether interim or otherwise) and also
Suite 920, Level 9,
Raheja Towers,
26-27, M G Road,
whether paid out of current or accumulated profits is
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
charged with additional tax at the rate of 15 %.
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
• The liability of payment of tax is on the principle officer of
Tel: +91 - 422 – 6552921
the company.
• The tax has to be paid within 14 days of declaration,
distribution or payment of any dividend whichever is the
earliest. The tax on distributed profit paid by the Company
EMAIL
info@altacit.com
would be treated as the final payment of tax in respect of
WEBSITE
dividend.
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16. SPECIAL PROVISIONS RELATING TO
LISTED COMPANY
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
• In addition to the steps mentioned above the listed
Tel: +91 - 44 - 2498 4821
companies also have to advance intimation regarding
BANGALORE
Suite 920, Level 9,
Raheja Towers,
the venue of the Board Meeting to the stock exchange
26-27, M G Road,
Bangalore - 560 001.
where the securities are listed.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
• Within 15 minutes of the closure of the Board meeting,
Tel: +91 - 422 – 6552921
intimation is also to be sent to the stock exchange
containing the particulars of dividend. Details regarding
the general meeting for the declaration of dividend are
also to be given to the Stock Exchange.
EMAIL
info@altacit.com
WEBSITE
www.altacit.com

17. CONCLUSION
CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004. These are the various steps which are usually involved
in the declaration and distribution of dividend by a
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
company incorporated under the Act.
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE However depending upon the facts and the
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
memorandum and articles of the company there might
Tel: +91 - 422 – 6552921
be some variation or addition to these steps.
EMAIL
info@altacit.com
WEBSITE
www.altacit.com

18. CHENNAI
3rd Floor, ‘Creative Enclave’,
148-150, Luz Church Road,
Mylapore,
Chennai - 600 004.
Tel: +91 - 44 - 2498 4821
BANGALORE
Suite 920, Level 9,
Raheja Towers,
THANK YOU
26-27, M G Road,
Bangalore - 560 001.
Tel: +91 - 80 - 6546 2400
COIMBATORE
BB1, Park Avenue,
# 48, Race Course Road,
Coimbatore - 641018.
Tel: +91 - 422 – 6552921
EMAIL
info@altacit.com
WEBSITE
www.altacit.com