Section 148 — Inter-Corp Dividend 80M | ITA 2025

Section 148 — INTER-CORPORATE DIVIDEND DEDUCTION (1961 s. 80M SUCCESSOR)

Section 148 is the substantive equivalent of 1961 s. 80M. Domestic company allowed deduction equal to dividend received from another domestic company / business trust / specified foreign company TO THE EXTENT THAT it on-distributes such dividend to its own shareholders before the s. 263(1) due-date. Eliminates cascading effect of dividend taxation in multi-tier corporate structures (post-FA 2020 abolition of DDT). Available IN BOTH OLD AND NEW REGIMES.

Statutory text — Income-tax Act, 2025

Marginal note — Deduction in respect of certain inter-corporate dividends

(1) If the gross total income of a domestic company in any tax year includes a ny 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 at least one month before the due date for filing the return of income under section 263(1).

(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.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 148	INCOME-TAX ACT, 1961 — s. 80M
Dom-co dividend deduction = dividend on-distributed	1961 s. 80M(1) (FA 2020 onwards)
Including dividend from business trust	Same
Including from foreign co. ≥ 26% (s. 199 carve-out)	Same
On-distribution by s. 263 due-date	1961 s. 80M(2)

PURPOSE — POST-FA 2020 RE-INTRODUCTION

Pre-FA 2020: DDT (Dividend Distribution Tax) was levied at company level; recipient receipt was tax-exempt. FA 2020 abolished DDT; dividend now taxed in shareholder's hands at applicable rates. This created a CASCADING problem in multi-tier structures: Subsidiary → Holding (taxed as dividend) → Holding's shareholders (taxed AGAIN as dividend). Section 80M (now s. 148) was re-introduced to BREAK the cascade — holding-co. gets deduction equal to onward-distributed dividend, ensuring single-level tax.

PLANNING NOTES

(i) For holding companies receiving dividend from operating subsidiaries, plan onward distribution to shareholders BEFORE s. 263 due-date to claim s. 148. (ii) Documentation: dividend-received vs. dividend-paid reconciliation; CFO certification. (iii) For multi-tier groups (sub → mid-co → holding), each tier must claim s. 148 to break cascading. (iv) For dividends from foreign subsidiaries (≥ 26% holding), s. 148 deduction available subject to Schedule of qualifying foreign jurisdictions.

CROSS-REFERENCES

Section 199 — Special-rate tax on dividend (NR / specified-foreign).
Section 92(2)(a) — Dividend as Other Sources income.
Section 263 — Return-filing due date (anchor for on-distribution).

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