Section 148 Income Tax Act 2025: Who Can Claim Inter-Corporate Dividend Deduction?

Section 148 allows a qualifying domestic company to deduct certain dividend income to the extent it redistributes dividends within the statutory deadline. The provision seeks to reduce repeated taxation of dividends as they pass through corporate structures.

What does Section 148 of the Income-tax Act, 2025 provide?

Section 148 is titled "Deduction in respect of certain inter-corporate dividends." Where the gross total income of a domestic company for a tax year includes dividends from another domestic company, a foreign company or a business trust, the recipient domestic company may claim a deduction, subject to the amount of dividends it distributes within the prescribed time.

The deduction is not an automatic exemption for every dividend receipt. It is linked to the actual amount of dividends distributed by the claimant company and the statutory timing condition.

Who can claim the Section 148 deduction?

• Claimant: A domestic company whose gross total income includes qualifying dividend income.
• Permitted sources: Dividends received from another domestic company, a foreign company or a business trust.
• Redistribution: The claimant company must distribute dividends within the statutory deadline to qualify for the corresponding deduction.

An individual shareholder, partnership firm or LLP cannot claim this particular deduction merely because it receives dividend income; the claimant under Section 148 must be a domestic company.

How is the deduction calculated?

The deduction is restricted to the lower of (a) qualifying dividend income received by the domestic company and (b) the amount of dividend distributed by that company within the statutory deadline.

The deduction is considered within the framework of gross total income and other applicable provisions. The same dividend distribution amount cannot be used again to obtain a deduction in another tax year.

What is the dividend distribution deadline?

The domestic company must distribute the dividend at least one month before the due date for filing its return of income under Section 263(1) of the Income-tax Act, 2025. This is not necessarily the same as the return-filing due date itself. The company should establish its applicable filing due date and work backwards to determine the latest permissible dividend distribution date.

Because filing deadlines may differ depending on the company and applicable extensions, the actual deadline should be checked for the relevant tax year.

Relevant statutory terms

Domestic company

A company qualifying as a domestic company under the definitions of the Income-tax Act, 2025. This is the category of company eligible to claim the deduction under Section 148.

Foreign company

A company that does not qualify as a domestic company under the Act. Dividends received from such a company may be included in the eligible dividend pool of a domestic claimant company.

Business trust

A business trust recognised under the Act, including qualifying trust structures as defined by the relevant statutory provisions. Section 148 expressly includes dividends from a business trust as an eligible source.

Gross total income

The income computed under the Act before making the relevant Chapter VIII deductions, subject to the statutory computation rules.

Tax year

The tax year is the relevant financial year used under the Income-tax Act, 2025, subject to the statutory definition and special rules applicable to a particular case.

Practical example of Section 148 deduction

Assume ABC Ltd., a domestic company, receives Rs 40 lakh in qualifying dividends during a tax year and distributes Rs 25 lakh in dividends at least one month before its applicable return-filing due date.

This is a simplified illustration. Actual computation depends on the facts, gross total income and other applicable provisions.

Documentation and statutory restrictions

• Maintain dividend receipts, bank records and supporting dividend statements.
• Retain board resolutions and evidence of the date and amount of dividend distribution.
• Determine and document the applicable return-filing due date under Section 263(1).
• Ensure that the deduction claimed does not exceed qualifying dividend income or timely dividend distribution.
• Do not claim a deduction in a later tax year for a dividend distribution amount already used to obtain a deduction in an earlier tax year.

Relationship with Section 80M of the Income-tax Act, 1961

Section 148 of the Income-tax Act, 2025 broadly carries forward the inter-corporate dividend deduction concept previously contained in Section 80M of the Income-tax Act, 1961. For tax years governed by the 2025 Act, taxpayers should use the new section numbering and applicable filing provisions.

Frequently asked questions

Official legal references

For authoritative wording and amendments, refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Income Tax Department's 2025 Act resource page. The statutory text prevails over this explanatory article.

Last reviewed: 10 November 2026. General legal information; individual claims require review of the applicable facts and law.