Chapter VIII - Deductions to be Made in Computing Total Income
Section 148
Section 148: deduction for inter-corporate dividends
Section 148 is the Income-tax Act, 2025's version of the deduction long known as "80M" - it stops the same dividend income being effectively taxed twice as it passes through a chain of companies, by letting a domestic company deduct dividend income it received and then redistributed onward to its own shareholders.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) If the gross total income of a domestic company in any tax year includes any 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.
Introduction
Section 148 relieves certain dividend income received by a domestic company when it distributes its own dividend by the specified date. The deduction cannot exceed the amount distributed, and the same distribution cannot support a second year's claim.
Key takeaways
Received and redistributed dividends
A domestic company may deduct eligible dividends received from another domestic or foreign company or a business trust, to the extent it distributes its own dividend at least one month before the return-filing due date.
No repeat deduction
An amount distributed and deducted under this rule cannot support a second deduction in another tax year.
How the deduction works
If a domestic company's gross total income includes dividend income from another domestic company, a foreign company, or a business trust, it can deduct the amount of that dividend income up to the amount of dividend it itself distributes to its shareholders at least one month before the due date for filing its return.
In effect: dividend received in, then paid straight back out to shareholders, is not taxed again inside the recipient company - only the amount actually retained (not redistributed) stays in taxable income.
Key condition
Once a deduction has been allowed for an amount of distributed dividend in one tax year, the same amount cannot be used again to claim a deduction in any other tax year.
Match receipts and distributions
Compare qualifying dividends received from a domestic company, foreign company or business trust with the dividend distributed by the claimant domestic company. The distribution must occur at least one month before its Section 263(1) return due date.
Step-by-step flow for applying Section 148
- 1
Is the assessee a domestic company?
- No: Section 148 does not apply.
- Yes: Go to the next step.
- 2
Does gross total income include dividends from another domestic company, a foreign company or a business trust?
- No: No deduction under Section 148.
- Yes: Go to the next step.
- 3
How much dividend did the company itself distribute at least one month before its Section 263(1) due date?
Distributions made later than that do not count.
- 4
Has that distributed amount already supported a deduction in another tax year?
- Yes: That amount cannot be used again (Section 148(2)).
- No: Deduct the lower of the qualifying dividend received and the qualifying dividend distributed.
Practical checklist
Do
- Keep dividend receipt statements, board records and bank evidence of the company's distribution.
- Calculate the deduction against the lesser of qualifying received dividend and timely distributed dividend.
Avoid
- Do not reuse a dividend distribution for deduction in another tax year.
- Do not assume a dividend paid too close to the return due date qualifies.
Illustrative example
Worked example: a holding company passing dividends on
Hypothetical facts (illustration only, not a real taxpayer): Alpha Ltd, a domestic company, receives dividends of ₹40 lakh from Beta Ltd (a domestic company) and ₹10 lakh from Gamma Inc (a foreign company) during the tax year. It distributes ₹30 lakh to its own shareholders more than one month before its Section 263(1) due date, and a further ₹15 lakh within the last month before that date.
Dividends received
₹40 lakh + ₹10 lakh = ₹50 lakh of qualifying dividend income.
Qualifying distribution
Only the ₹30 lakh paid at least one month before the due date counts; the ₹15 lakh paid later does not.
Deduction
The lower of ₹50 lakh and ₹30 lakh = ₹30 lakh.
Remaining dividend
₹50 lakh - ₹30 lakh = ₹20 lakh stays in Alpha Ltd's total income.
Outcome
- Alpha Ltd's Section 148 deduction for the year is ₹30 lakh.
- The ₹30 lakh distribution cannot be used again to support a deduction in any other tax year (Section 148(2)).
Glossary
- Domestic company
- The company category eligible to claim this deduction under subsection (1).
- Business trust
- One of the permitted sources of dividend income listed in subsection (1).
Frequently asked questions
Is this the deduction people call "80M"?
Yes - the same inter-corporate dividend relief, now numbered Section 148 under the Income-tax Act, 2025.
Does this apply to an individual shareholder?
No - Section 148 applies to a domestic company that itself receives dividends and redistributes them onward, not to an individual investor.
What's the deadline for distributing the dividend to get the deduction?
The dividend must be distributed at least one month before the due date for filing the company's return of income under Section 263(1).
What if the company distributes less than it received?
The deduction is capped at the amount distributed at least one month before the Section 263(1) due date. For example, if ₹50 lakh is received and ₹30 lakh is distributed in time, the deduction is ₹30 lakh and ₹20 lakh remains taxable.
Need help applying this provision to your situation?
Check your Section 148 dividend deduction with our tax teamLast updated 9 October 2026