This web story explores the key changes in inter-corporate dividends under the 2025 Income Tax Bill.

When one company receives dividends from another company, it is termed inter-corporate dividends.

 Section 80M allows a domestic company to claim a deduction on dividends received from another domestic company. Previously aimed at preventing double taxation.

The Income Tax Bill 2025 proposes significant changes to inter-corporate dividend taxation, altering corporate tax liabilities.

 Earlier, companies paid DDT on dividends distributed, increasing tax burdens Now abolished, shifting the tax liability to shareholders.

A domestic company can claim a deduction on the dividend it receives if it redistributes it within a specified time.

 The purpose of Section 80M is to avoid double taxation on inter-corporate dividends. This encourages corporate reinvestment.

To claim deductions, companies must redistribute the received dividends within the prescribed time limit.

These changes take effect from April 1, 2025, impacting the FY 2025-26 tax filings.

Companies should review dividend policies to maximize tax benefits under the new provisions.

 Key challenges include:Compliance with time-bound redistribution of dividends. Increased documentation and tax filings.

Consult tax experts to ensure compliance and optimize dividend taxation strategies under the new rules.

The Income Tax Bill 2025 brings major changes to inter-corporate dividends. Companies must adapt to these updates for better tax planning.