Section 115BBD taxed an Indian company on dividends declared, distributed or paid by a specified foreign company at fifteen per cent, with the rest of the total income taxed as if it were the total income. A specified foreign company is one in which the Indian company holds twenty-six per cent or more in nominal value of the equity share capital. "Dividends" has the meaning in s. 2(22) but excludes sub-clause (e).
No deduction for any expenditure or allowance was allowed in computing the dividend income. Sub-section (4) states that the section does not apply to any assessment year beginning on or after the 1st day of April, 2023.
Operative consequences
For AY 2022-23 and earlier, qualifying foreign dividends bore the fifteen per cent rate on a gross basis.
From AY 2023-24 the section has no application, and such dividends are taxed under the other provisions of the Act; s. 80M allows a deduction for dividends from a foreign company to the extent of dividend distributed by the recipient.
Status
Section 115BBD has expired by its own sub-section (4) and does not apply for AY 2026-27. The Finance Act, 2026 does not amend it.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is none.
Case Laws & Commentary
SECTION 115BBD — TAX ON CERTAIN DIVIDENDS RECEIVED FROM FOREIGN COMPANIES
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 115BBD prescribed a concessional flat rate of fifteen per cent on dividends received by an Indian company from a specified foreign company in which it held twenty-six per cent or more of the nominal value of the equity share capital. Where the total income of such an Indian company included income by way of such dividends, the tax was the aggregate of (i) fifteen per cent on the gross dividends (no deduction in respect of any expenditure or allowance being allowed) and (ii) tax on the balance income as if it were the total income. The object was to encourage Indian multinationals to repatriate the profits of their foreign subsidiaries to India by removing the deterrent of a full-rate charge.
The provision is now SPENT for current assessment years. By the amendment made by the Finance Act, 2020 (consequent on the abolition of the dividend distribution tax and the move to classical taxation of dividends, with the section 80M deduction for inter-corporate dividends), section 115BBD was made inapplicable to any assessment year beginning on or after 1 April 2023. For AY 2023-24 onward, dividends from foreign companies are taxed at the normal rates applicable to the Indian company, with relief for cascading addressed through section 80M (extended to foreign dividends in the integrated scheme) and treaty/credit mechanisms.
A.2 Sub-section / clause taxonomy
Sub-section (1): the 15% charge on the specified foreign dividends, plus tax on the balance income. Sub-section (2): no deduction in respect of any expenditure/allowance or set-off of loss against the dividends (gross-basis charge). Sub-section (3) (sunset): the section shall not apply to any assessment year beginning on or after 1 April 2023. Explanation: 'specified foreign company' (Indian company holding 26% or more of the equity).
A.3 Core doctrinal themes
Theme (1) - Concessional repatriation rate (historic): while operative, the section gave a flat 15% on qualifying foreign dividends to incentivise repatriation, on a gross basis.
Theme (2) - Sunset from AY 2023-24: the concession was withdrawn as part of the DDT-abolition reform; foreign dividends are now taxed at normal rates with section 80M relief for onward distribution.
Theme (3) - 26% holding gateway (historic): the concession applied only where the Indian company held 26% or more of the equity of the foreign company.
Section 115BBD was inserted (originally as a one-year measure and subsequently continued) to provide a concessional 15% rate on dividends from specified foreign companies. Following the abolition of the dividend distribution tax and the shift to classical dividend taxation by the Finance Act, 2020, the section was made inapplicable to assessment years beginning on or after 1 April 2023; section 80M was correspondingly designed to relieve cascading on inter-corporate (including foreign) dividends.
Finance Act 2026: no amendment. The section remains spent (inapplicable from AY 2023-24); foreign dividends are taxed at normal rates with section 80M relief for AY 2026-27 onward.
A.5 CA practitioner pointers
(1) For AY 2023-24 onward, do not apply the 15% section 115BBD rate - it is spent; tax foreign dividends at the company's normal rate. (2) Claim the section 80M deduction where the foreign dividend is on-distributed by the Indian company within the prescribed time, to relieve cascading. (3) Use the foreign tax credit and any applicable DTAA to mitigate double taxation of the foreign dividend. (4) For any reopened earlier year (up to AY 2022-23) where the section was operative, apply the 15% gross-basis charge to qualifying 26%-holding dividends.
B. FINANCE ACT, 2026 - IMPACT NOTE
Section 115BBD is NOT amended by the Finance Act, 2026 and remains spent for current assessment years (inapplicable to any assessment year beginning on or after 1 April 2023, per the Finance Act, 2020 sunset). For AY 2026-27, dividends from foreign companies are taxed at the Indian company's normal rates, with section 80M relief for onward distribution.
C. CASE LAW - CLUSTERED BY ISSUE
Cluster C-1 : Successor framework - normal-rate taxation with section 80M relief
Section 80M (inter-corporate dividend deduction) - the successor relief (cross-reference).
Principle: With section 115BBD spent from AY 2023-24, the relief from cascading on inter-corporate dividends (including dividends from foreign companies that are on-distributed) is now delivered through section 80M, which allows a deduction to a domestic company of the dividend received to the extent it is further distributed within the prescribed period. The classical system taxes the dividend in the recipient's hands at normal rates, with section 80M neutralising the cascade.
Relevance: Directs the practitioner to the live mechanism (normal rate plus section 80M) that replaced the section 115BBD concession; the section 80M jurisprudence (descending from the inter-corporate-dividend line) governs the current treatment.
Candid note on the case-law field: Section 115BBD generated little dedicated litigation while operative and is now spent; the live law is the normal-rate-plus-section-80M framework. The cross-reference above is identified as an authority on the successor relief, not on the spent section. No decision has been invented under section 115BBD.
D. PRACTITIONER'S NOTE
Section 115BBD is spent from AY 2023-24: tax foreign dividends at normal rates and rely on section 80M for cascade relief and on the foreign tax credit/DTAA for double-tax relief. The 15% concession survives only for the operative legacy years (up to AY 2022-23), where the 26%-holding gateway and the gross-basis charge apply.
E. SOURCES & CITATIONS
Section 115BBD is not amended by the Finance Act, 2026.
Caveat: Treatise-style commentary for practitioners and academic use; not legal opinion. Section 115BBD is spent for current years; verify the operative-year position, the section 80M conditions and the latest CBDT/appellate position before relying on any proposition.
Function in the statutory architecture
Section 115BBD taxed an Indian company on dividends declared, distributed or paid by a specified foreign company at fifteen per cent, with the rest of the total income taxed as if it were the total income. A specified foreign company is one in which the Indian company holds twenty-six per cent or more in nominal value of the equity share capital. "Dividends" has the meaning in s. 2(22) but excludes sub-clause (e).
No deduction for any expenditure or allowance was allowed in computing the dividend income. Sub-section (4) states that the section does not apply to any assessment year beginning on or after the 1st day of April, 2023.
Operative consequences
Status
Section 115BBD has expired by its own sub-section (4) and does not apply for AY 2026-27. The Finance Act, 2026 does not amend it.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is none.
Case Laws & Commentary
SECTION 115BBD — TAX ON CERTAIN DIVIDENDS RECEIVED FROM FOREIGN COMPANIES
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 115BBD prescribed a concessional flat rate of fifteen per cent on dividends received by an Indian company from a specified foreign company in which it held twenty-six per cent or more of the nominal value of the equity share capital. Where the total income of such an Indian company included income by way of such dividends, the tax was the aggregate of (i) fifteen per cent on the gross dividends (no deduction in respect of any expenditure or allowance being allowed) and (ii) tax on the balance income as if it were the total income. The object was to encourage Indian multinationals to repatriate the profits of their foreign subsidiaries to India by removing the deterrent of a full-rate charge.
The provision is now SPENT for current assessment years. By the amendment made by the Finance Act, 2020 (consequent on the abolition of the dividend distribution tax and the move to classical taxation of dividends, with the section 80M deduction for inter-corporate dividends), section 115BBD was made inapplicable to any assessment year beginning on or after 1 April 2023. For AY 2023-24 onward, dividends from foreign companies are taxed at the normal rates applicable to the Indian company, with relief for cascading addressed through section 80M (extended to foreign dividends in the integrated scheme) and treaty/credit mechanisms.
A.2 Sub-section / clause taxonomy
Sub-section (1): the 15% charge on the specified foreign dividends, plus tax on the balance income. Sub-section (2): no deduction in respect of any expenditure/allowance or set-off of loss against the dividends (gross-basis charge). Sub-section (3) (sunset): the section shall not apply to any assessment year beginning on or after 1 April 2023. Explanation: 'specified foreign company' (Indian company holding 26% or more of the equity).
A.3 Core doctrinal themes
Theme (1) - Concessional repatriation rate (historic): while operative, the section gave a flat 15% on qualifying foreign dividends to incentivise repatriation, on a gross basis.
Theme (2) - Sunset from AY 2023-24: the concession was withdrawn as part of the DDT-abolition reform; foreign dividends are now taxed at normal rates with section 80M relief for onward distribution.
Theme (3) - 26% holding gateway (historic): the concession applied only where the Indian company held 26% or more of the equity of the foreign company.
A.4 Legislative evolution / Finance Act amendment trail
Section 115BBD was inserted (originally as a one-year measure and subsequently continued) to provide a concessional 15% rate on dividends from specified foreign companies. Following the abolition of the dividend distribution tax and the shift to classical dividend taxation by the Finance Act, 2020, the section was made inapplicable to assessment years beginning on or after 1 April 2023; section 80M was correspondingly designed to relieve cascading on inter-corporate (including foreign) dividends.
Finance Act 2026: no amendment. The section remains spent (inapplicable from AY 2023-24); foreign dividends are taxed at normal rates with section 80M relief for AY 2026-27 onward.
A.5 CA practitioner pointers
(1) For AY 2023-24 onward, do not apply the 15% section 115BBD rate - it is spent; tax foreign dividends at the company's normal rate. (2) Claim the section 80M deduction where the foreign dividend is on-distributed by the Indian company within the prescribed time, to relieve cascading. (3) Use the foreign tax credit and any applicable DTAA to mitigate double taxation of the foreign dividend. (4) For any reopened earlier year (up to AY 2022-23) where the section was operative, apply the 15% gross-basis charge to qualifying 26%-holding dividends.
B. FINANCE ACT, 2026 - IMPACT NOTE
Section 115BBD is NOT amended by the Finance Act, 2026 and remains spent for current assessment years (inapplicable to any assessment year beginning on or after 1 April 2023, per the Finance Act, 2020 sunset). For AY 2026-27, dividends from foreign companies are taxed at the Indian company's normal rates, with section 80M relief for onward distribution.
C. CASE LAW - CLUSTERED BY ISSUE
Cluster C-1 : Successor framework - normal-rate taxation with section 80M relief
Section 80M (inter-corporate dividend deduction) - the successor relief (cross-reference).
Principle: With section 115BBD spent from AY 2023-24, the relief from cascading on inter-corporate dividends (including dividends from foreign companies that are on-distributed) is now delivered through section 80M, which allows a deduction to a domestic company of the dividend received to the extent it is further distributed within the prescribed period. The classical system taxes the dividend in the recipient's hands at normal rates, with section 80M neutralising the cascade.
Relevance: Directs the practitioner to the live mechanism (normal rate plus section 80M) that replaced the section 115BBD concession; the section 80M jurisprudence (descending from the inter-corporate-dividend line) governs the current treatment.
Candid note on the case-law field: Section 115BBD generated little dedicated litigation while operative and is now spent; the live law is the normal-rate-plus-section-80M framework. The cross-reference above is identified as an authority on the successor relief, not on the spent section. No decision has been invented under section 115BBD.
D. PRACTITIONER'S NOTE
Section 115BBD is spent from AY 2023-24: tax foreign dividends at normal rates and rely on section 80M for cascade relief and on the foreign tax credit/DTAA for double-tax relief. The 15% concession survives only for the operative legacy years (up to AY 2022-23), where the 26%-holding gateway and the gross-basis charge apply.
E. SOURCES & CITATIONS
Section 115BBD is not amended by the Finance Act, 2026.
Caveat: Treatise-style commentary for practitioners and academic use; not legal opinion. Section 115BBD is spent for current years; verify the operative-year position, the section 80M conditions and the latest CBDT/appellate position before relying on any proposition.