Indian companies inter-corporate dividend 100% deduction. Holding company anti-cascading provision. Post-2020 DDT removal context.
Section 80M INDIAN COMPANIES ko ANOTHER INDIAN COMPANY se RECEIVED DIVIDEND par 100% DEDUCTION deti hai — anti-cascading provision. KEY: (1) Holding company structure tax efficient. (2) Cascade prevented — same dividend not taxed twice. (3) Only inter-corporate, not for individual shareholders. (4) Post-2020 DDT removed — companies pay corp tax + shareholders pay slab tax. 80M prevents double taxation in holding structures.
EXAMPLE: Tata Sons (holding) receives ₹5000cr dividend from Tata Steel (subsidiary). (a) Tata Sons gets 80M deduction ₹5000cr. (b) Effective: no corporate tax on this dividend at Tata Sons. (c) When Tata Sons distributes to its shareholders: those shareholders pay individual tax. Cascading avoided. CONDITION: must DISTRIBUTE to its own shareholders within timeframe. Otherwise 80M disallowed.
CONDITIONS: (1) RECEIVING company is Indian. (2) PAYING company is Indian. (3) Receiving company must DISTRIBUTE this dividend to its shareholders BEFORE due date of ITR filing for FY of receipt. (4) Distribution amount = at least the dividend received. PURPOSE: Encourage dividend flow + prevent retention as tax avoidance.
PRE-2020: Companies paid Dividend Distribution Tax (DDT) ~20%. Shareholders received tax-free dividend. POST-2020: DDT abolished. Companies pay corporate tax. Shareholders pay tax at slab. 80M ensures holding structures don't get cascaded — major efficiency gain. INDIVIDUAL impact: dividends taxed at slab rate (higher than DDT). Holding co structure benefits from 80M.
EXAMPLE: Indian holding company receives ₹100cr dividend from subsidiary. (1) Without 80M: ₹25.17cr corporate tax. (2) With 80M: ₹0 tax (full deduction). (3) Savings ₹25.17cr. Provided holding distributes ₹100cr+ to its shareholders within deadline. Large conglomerates (Tata, Reliance, Aditya Birla) actively use 80M for holding structure efficiency.