Section 148 of the Income-tax Act, 2025 — Deduction for Inter-Corporate Dividends (Old Section 80M)

In plain language

What Section 148 says in plain English

Section 148 of the Income-tax Act, 2025 lets a domestic company that has received dividend income from another company or business trust claim a deduction for that dividend, provided it passes on the dividend to its own shareholders within the prescribed time. This is the direct successor to the well-known Section 80M of the Income-tax Act, 1961, carried forward almost unchanged into the new Act effective 1 April 2026.

The whole point is to stop the same rupee of profit being taxed again and again as it travels up a chain of companies. Since Dividend Distribution Tax (DDT) was abolished in 2020, dividends are taxed in the hands of the recipient. Without relief, a holding company receiving a dividend would pay tax on it, and then its shareholders would pay tax again when that same money is passed on — a cascading effect. Section 148 removes that cascade for the portion that is redistributed.

Who can claim it

• Only a domestic company can claim the deduction — individuals, HUFs, LLPs and firms cannot use Section 148.
• The dividend must have been received from (a) another domestic company, (b) a foreign company, or (c) a business trust (REIT/InvIT).
• The claiming company must itself distribute dividend to its shareholders.

Note: Under the old Section 80M the deduction was limited to dividends received from domestic companies. Commentary on Section 148 indicates the eligible sources are described to cover dividends from domestic companies, foreign companies and business trusts — you should confirm the exact wording of sub-section (1) for foreign-company and business-trust dividends against the bare Act, as this is the area where interpretation matters most.

The key limit — deduction equals the lower of two amounts

The deduction is capped at the amount actually redistributed. In formula terms, the deduction allowed is the lower of:

• the dividend received during the tax year; and
• the dividend distributed by the company on or before the cut-off date.

So if you receive ₹10 lakh but pass on only ₹6 lakh, your deduction is ₹6 lakh — not ₹10 lakh. The remaining ₹4 lakh stays taxable.

The timing condition — one month before the return due date

This is the trap most companies fall into. The onward dividend must be distributed at least one month before the due date for filing the return of income under Section 263(1) of the 2025 Act. Distribute late and you lose the deduction for that year.

One-time benefit — no double dipping

Once a particular distributed amount has been used to claim the deduction in one tax year, the same amount cannot be claimed again in any other year. The relief is a single, one-time benefit per rupee of distribution.

How it interacts with related sections

• Concessional tax regime (old 115BAA / 22% companies): Section 148 is generally available even to domestic companies opting for the lower corporate tax rate — it is one of the few deductions such companies retain.
• Dividend income taxation: The dividend received is first included in total income, then Section 148 reduces the taxable portion.
• Return filing (Section 263): The one-month timing test is measured against this due date, so plan board declarations of dividend accordingly.

Practical implications

• Group structures benefit most — holding companies and multi-tier groups can move profits upward without repeated taxation, so long as they redistribute in time.
• Match your numbers — declare an onward dividend at least equal to what you received to get the full deduction.
• Watch the calendar — the deduction is lost if distribution slips past the one-month-before-due-date line.
• Keep documentation — board resolutions, dividend receipts and distribution records establish both the amount and the timing.