Insertion of new section 80M Deduction in respect of certain intercorporate dividends.

Insertion of new section 80M (Budget 2020)

After section 80LA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2021, namely:––

‘Section 80M of Income tax Act.:- Sub Section (1) Where the gross total income of a domestic company in any previous year includes any income by way of dividends from any other domestic company, there shall, in accordance with and subject to the provisions of this section of Income tax act, be allowed in computing the total income of such domestic company, a deduction of an amount equal to so much of the amount of income by way of dividends received from such other domestic company as does not exceed the amount of dividend distributed by the first mentioned domestic company on or before the due date (under sub-section (1) of section 139 of Income tax act).

Sub Section (2) Where any deduction in income tax return, in respect of the amount of dividend distributed by the domestic company, has been allowed under sub-section (1) in any previous year, no deduction shall be allowed in respect of such amount (Rupees) in any other previous year.

Explanation.––For the purposes of this section, the expression “due date” means the date one month prior to the date for furnishing the return of income under sub-section (1) of section 139 of Income tax act.’.

What are inter-corporate dividends?

When a company receives dividend by virtue of its shareholding in another domestic company, such dividends are known as inter-corporate dividends. Such dividends are exempt from Income tax when they are received from a domestic company. if received prior to the 1st of April 2020.