We know about Dividends from stock or Mutual Fund. But we hear about Interim and Final Dividends. What is the difference between Interim and Final Dividends? In this article, we will clear all of your confusion about these two types of dividends. Given below is the Dividend History of Reliance which shows Interim and Final Dividend.
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What is Final and Interim Dividend
A dividend of stock is a distribution of a portion of a company’s earnings to shareholders. The amount and timing of the dividend are decided by the board of directors, who also determine whether it is paid out of current earnings or the past earnings kept as reserve.
A Company can declare dividends at any time in the Financial Year. Based on when the company declares Dividends, dividends are classified as Interim and Final Dividend. There is also Special Dividend which is the non-recurring dividend that is tied to special events like the milestones profits earned by selling an asset, etc. The amount is usually larger in comparison to the normal dividend..For example in 2010, ITC declared as Special Centenary dividend of Re. 5.50 and a dividend of Re. 4.50 per Share for the financial year ended March 31, 2010
- The final dividend is declared after the end of FY
- The interim dividend is declared before the end of FY
Dividend received on or after 1 April 2020 is taxable in the hands of the investor/shareholder. Dividend received from an Indian company was exempt till 10 lakh until 31 March 2020 (FY 2019-20) as the company was paying dividend distribution tax (DDT). For more information on Tax on Dividend you can read our article Do I Need to Pay Tax on Dividend Income? How to report Dividend Income in ITR?
Difference between Final and Interim Dividend
|INTERIM DIVIDEND||FINAL DIVIDEND|
|The interim dividend is declared before the end of FY||The final dividend is declared after the end of FY|
|This dividend is paid before the finalization of accounts of the year.||This dividend is paid after the finalization of the account of the year|
|This dividend is declared by the Board of Directors(BOD)||This dividend is recommended by BOD but
approved by Shareholders in Annual General meeting(AGM)
|Can be revoked with the consent of all the shareholders||Cannot be revoked in any circumstances|
|Not defined under companies act||Defined under companies act|
|Rate of interim dividend is always less than the rate of final dividend||Rate of final dividend is always higher than interim dividend|
Example of Dividend History of ITC which shows Final and Interim Dividend
Given below is the Dividend History of ITC which shows Interim and Final Dividend.
For example in 2010, ITC declared as Special Centenary dividend of Re. 5.50 p and a dividend of Re. 4.50 per Ordinary Share for the financial year ended March 31, 2010
Tax on Dividend of Stocks
Some facts that you should know about Dividend of Stocks
- Do I Need to Pay Tax on Dividend Income? How to report Dividend Income in ITR?
- Dividends of Stocks: Pros & Cons, Compounding
- Dividends Options of Mutual Funds:Tax, Switch
- Income From Other Sources
- Unclaimed Mutual Fund Dividend
- RSU of MNC, perquisite, tax , Capital gains, ITR, eTrade
Do you get Dividend from Stocks or Mutual Funds? Do you think Tax on Dividends is justified? Which stock gives you Dividend?