Deduction in respect of certain inter-corporate dividends
[Section-148 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 148(1) of Income Tax Act 2025
148(1) If the gross total income of a domestic company in any tax year includes any income by way of dividends from––
- (a) any other domestic company; or
- (b) a foreign company; or
- (c) a business trust,
such domestic company shall, be allowed a deduction of an amount equal to so much of the income by way of dividends received from the person mentioned in clause (a) or (b) or (c) as does not exceed the amount of dividend distributed by it by the date one month before the due date for filing the return of income under section 263(1).
Section 148(2) of Income Tax Act 2025
148(2) Where any deduction, in respect of the amount of dividend distributed by the domestic company, has been allowed under sub-section (1) in any tax year, no deduction shall be allowed in respect of such amount in any other tax year.
FAQs on Section 148 of Income Tax Act 2025
What is the purpose of Section 148 of the Income Tax Act, 2025?
Section 148 provides a deduction to a domestic company in respect of dividends received from certain entities, to the extent it redistributes such dividends within a specified time.
Who can claim the deduction under Section 148?
Only a domestic company can claim the deduction.
What types of dividend income are eligible for deduction under Section 148(1)?
Dividends received from another domestic company, a foreign company, or a business trust are eligible.
Is there a time limit within which the dividend must be redistributed to claim the deduction?
Yes, the domestic company must distribute the dividend on or before one month prior to the due date of filing the return under Section 263(1).
What is the maximum amount eligible for deduction under Section 148(1)?
The deduction is limited to the lower of the dividend income received or the amount of dividend distributed by the company within the specified period.
Can the company distribute more than it received and claim deduction for the entire distributed amount?
No, the deduction is capped at the amount of dividend received from the eligible entities.
What happens if the company distributes dividend after the cut-off date?
Such distribution will not qualify for deduction under Section 148.
Can the company carry forward the deduction if not claimed in the current year?
No, Section 148(2) specifically prohibits claiming the deduction for the same dividend amount in any other tax year.
Is the deduction available if dividend is received from a partnership firm or LLP?
No, only dividends from a domestic company, foreign company, or business trust qualify.
What is the relevance of the due date under Section 263(1)?
The one-month-before timeline for dividend distribution is calculated in reference to the due date for return filing under Section 263(1).
Does Section 148(1) apply to dividends received from foreign companies?
Yes, dividends from foreign companies are covered under clause (b) of Section 148(1).
Can a domestic company claim deduction for dividends distributed as interim dividends?
Yes, as long as the distribution meets the timing and source requirements, interim dividends can qualify.
Is there a requirement to maintain a direct link between the dividend received and the one distributed?
No explicit requirement is mentioned, but the deduction is limited to the lower of the two amounts.
If the dividend is distributed to a non-corporate shareholder, will deduction still be allowed?
Yes, Section 148 focuses on the amount redistributed, not the identity of the recipient.
Can multiple deductions be claimed for the same dividend received over different tax years?
No, Section 148(2) clearly disallows such repetition of deduction.
Does Section 148 override other deduction provisions under this Act?
Section 148 operates independently and does not mention overriding other provisions.
Is the deduction automatic or requires specific disclosure in the return?
While the section allows the deduction, appropriate disclosure in the return would typically be required for claim validation.
Will dividend income from a business trust be treated differently?
No, dividend income from a business trust is treated at par with income from companies for this section.
What is the consequence if the company does not distribute any dividend?
No deduction under Section 148 will be allowed in such case.
Can the deduction exceed the dividend income received from the eligible sources?
No, deduction is restricted to the amount of eligible dividend income received.
Refresh Page