Section 115-O of Income Tax Act: Dividend Distribution Tax on Domestic Companies
Section 115-O of the Income-tax Act, 1961 contained the former Dividend Distribution Tax, commonly called DDT, under which a domestic company paid additional income-tax on specified dividends declared, distributed or paid by it. The provision is important for historical assessments, disputes and proceedings, but it is not a current DDT charge for dividends paid today.
Article updated: 28 September 2026. This page explains a legacy provision and should be read with the law applicable to the relevant year.
What was Section 115-O?
Section 115-O imposed an additional income-tax on the distributed profits of a domestic company when it declared, distributed or paid dividends covered by the provision. This tax was separate from the ordinary income-tax payable by the company on its total income.
The charging rule operated notwithstanding other provisions of the 1961 Act. For the period stated in the section, the general DDT rate specified in sub-section (1) was 15 percent. A special 30 percent rate applied to dividend referred to in section 2(22)(e), subject to the statutory conditions then in force.
When did Dividend Distribution Tax under Section 115-O apply?
Relevant statutory period: dividends declared, distributed or paid on or after 1 April 2003 and on or before 31 March 2020, subject to the version of the law applicable for the relevant year.
From 1 April 2020: Section 115-O ceased to impose DDT on new dividend distributions. Dividend income became taxable in the hands of the recipient under the applicable income-tax provisions, with withholding requirements where applicable.
Key provisions of historical Section 115-O
| Provision | What it provided |
|---|---|
| Section 115-O(1) | Charged additional income-tax on specified dividends declared, distributed or paid by a domestic company during the period covered by the section. |
| Section 115-O(1A) | Allowed specified reductions while determining the dividend amount for DDT purposes, including qualifying dividends received from a subsidiary and qualifying dividend paid for or on behalf of the New Pension System Trust, subject to conditions. |
| Section 115-O(1B) | Provided the grossing-up mechanism for net distributed profits for determining DDT, subject to the statutory exception for dividend covered by section 2(22)(e). |
| Section 115-O(2) | Made DDT payable even where no income-tax was otherwise payable by the domestic company on its total income. |
| Section 115-O(3) | Required the principal officer and the company to pay DDT to the Central Government within 14 days from declaration, distribution or payment of dividend, whichever occurred earliest. |
| Section 115-O(4) | Treated DDT paid by the company as final payment of tax in respect of the distributed amount and barred further credit for that tax. |
| Section 115-O(5) | Denied deduction to the company or shareholder in respect of the amount charged to DDT or the tax thereon. |
| Section 115-O(6) | Contained a historical exemption relating to certain Special Economic Zone developers or enterprises; the sub-section itself provided that the relief ceased from 1 June 2011. |
| Section 115-O(7) | Contained an exemption for specified dividends paid by a specified domestic company to a business trust out of qualifying current income, subject to the conditions in the provision. |
| Section 115-O(8) | Contained an exemption for qualifying dividends of a company that was a unit of an International Financial Services Centre and derived income solely in convertible foreign exchange, subject to the statutory conditions. |
Important definitions and linked provisions
Domestic company
For the historical operation of Section 115-O, the expression "domestic company" had to be read with the definition and other applicable provisions of the Income-tax Act, 1961 for the relevant assessment year.
Dividend under section 2(22)
The expression "dividend" was governed by section 2(22) of the 1961 Act. Section 115-O specifically referred to section 2(22)(e), the provision dealing with certain loans or advances treated as deemed dividend, for the special rule then contained in Section 115-O.
Subsidiary for Section 115-O(1A)
For the reduction mechanism in sub-section (1A), the section treated a company as a subsidiary where the other company held more than half of the nominal value of its equity share capital.
Section 115BBD
Section 115-O(1A), in its historical form, referred to tax payable by a domestic company under section 115BBD on specified dividends received from a foreign company when applying the reduction mechanism.
Related default and interest provisions
Historical DDT compliance also interacted with Sections 115P and 115Q, which dealt with interest for delayed payment and consequences of default under the former distributed profits tax regime.
Abolition of DDT and present dividend-tax position
The Finance Act, 2020 ended the company-level DDT regime for dividends after 31 March 2020. Therefore, a reader should not use the former 15 percent DDT rate in Section 115-O to calculate tax on a current dividend. For periods after the DDT regime, dividend income is considered in the hands of the recipient under the law applicable to that period, together with any applicable withholding provisions.
Income Tax Act 2025 and old Section 115-O matters
The Income Tax Act, 2025 came into force on 1 April 2026 and repealed the Income-tax Act, 1961. The repeal does not erase liabilities, rights or proceedings relating to tax years beginning before 1 April 2026. Section 536 of the 2025 Act contains repeal and savings provisions, and the Income Tax Department states that proceedings concerning earlier tax years continue under the repealed 1961 Act where the savings provisions so require.
Accordingly, this Section 115-O page remains useful as a historical reference, but current transactions from Tax Year 2026-27 onward should be examined under the Income Tax Act, 2025 and the applicable Finance Act, Rules and notifications.
Frequently asked questions
Is Section 115-O applicable to dividends paid now?
No. The DDT charge under Section 115-O was limited to covered dividends on or before 31 March 2020. It should not be applied as a current company-level DDT charge.
Why is Section 115-O still relevant?
It may remain relevant for historical tax periods and for proceedings, liabilities or disputes preserved under the repeal and savings framework.
Was DDT payable even if the company had no regular income-tax liability?
Yes, during the period in which Section 115-O operated, sub-section (2) provided that DDT was payable notwithstanding that no income-tax was payable by the domestic company on its total income.
What was the payment deadline under Section 115-O?
Sub-section (3) required payment within 14 days from the earliest of declaration, distribution or payment of the dividend.