Define the term of Dividend in the income tax ordinance

DIVIDEND :-

The profit which is distributed among the shareholders or modarba certificate holders after paying the tax is called dividend.

Payment Included In Dividend :-

Following payments made by the company to its shareholders are treated as dividend.

1. Payment Out Of Profit :-

Any payment made by a company out of accumulated profits to the shareholders.

2. Current Year Profit :-

Distribution of cash out of current year profit to the shareholders.

3. Payment Of Liquidation :-

The profits which are paid on the liquidation of a company to the shareholders and modarba certificate holders are also included in the dividend.

4. Capital Reduction :-

Distribution of profit on the reduction of capital to the extent to which the company possessed the accumulated profit.

5. Premium On Shares :-

Distribution of cash made by the company out of share premium to the shareholders is also included in dividend.

6. Bonus Shares :-

If profit is distributed among the shareholders in the shape of bonus shares these are also included in dividend.

7. Debentures :-

If profit is distributed among the shareholders and modarba certificate holders in the shape of debentures, these are also included in dividends.

8. Deposit Certificate :-

Profit distributed among the shareholders in the way of deposit certificates is also included in dividend.

Not Included In Dividends :-

Following amounts are not included in the dividend :

• Loan : A loan which is advanced by the company to the shareholders.
• Full consideration : Distribution at the time of liquidation or reduction of capital in respect of any share for full consideration is not included in the dividend.