CORAA University · Free tool · 2026

Dividend calculator 2026 how much can be declared?

Enter the year’s profit, past losses and reserves, and see the most a company can declare as dividend for FY 2025-26 or FY 2026-27 — out of profits first, then out of free reserves under the four Rule 3 tests, with the cap on an interim dividend in a loss year, every payment deadline from the date of declaration, and the TDS to deduct.

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Which dividend?

Profits and reserves (₹ lakh)

Profit / (loss) for the year, after depreciation

After Schedule II depreciation and tax, excluding unrealised and fair-value gains. Enter a loss as a negative number.

Undistributed profits of previous years

Credit balance brought forward in the profit and loss account

Carried-over previous losses

Not yet set off — must be absorbed by this year’s profit first

Depreciation not provided in previous years

Arrears of depreciation, if any

Transfer to reserves before dividend

Voluntary — the Act no longer fixes a percentage

Free reserves

As per the latest audited financial statement — excludes revaluation reserve and unrealised gains

Paid-up share capital

As per the latest audited financial statement

Proposed dividend rate (% of paid-up capital)

Dividend history and date

Dividend rate declared in each of the three preceding financial years (%)

Year 1 (latest)

Year 2

Year 3

Date of declaration

The AGM date for a final dividend; the Board meeting date for an interim dividend.

TDS on the dividend — one shareholder

When is the dividend paid?

Shareholder

Dividend to this shareholder in the year (₹)

Aggregate of all dividends from the company in the year, in rupees

PAN furnished?

Why this matters in audit

The dividend resolution is only as good as the reserves note

A dividend that draws on reserves is tested four ways, and each test reads off the latest audited balance sheet. CORAA carries the profit, reserves and prior-year dividend figures through from the books, so the Section 123 working and the auditor’s Rule 11(f) statement on dividend start from the same numbers.

Depreciation has to be right before the profit is — check it with the Schedule II depreciation calculator. And a company in default on deposits cannot declare an equity dividend at all: run the deposit or not checker.

How much dividend can a company declare in 2026?

Section 123(1) of the Companies Act, 2013 allows a dividend only out of three sources: the profits of the year arrived at after providing for depreciation under Schedule II; the profits of any previous financial year, similarly arrived at and remaining undistributed; or both. Unrealised gains, notional gains, revaluation surpluses and fair-value changes are excluded from profit for this purpose. Before any dividend, the fourth proviso — added in 2015 — requires carried-over previous losses and depreciation not provided in earlier years to be set off against the current year’s profit. A transfer to reserves before dividend is now optional: the company may transfer whatever percentage it considers appropriate, including nothing.

Where profits are inadequate or absent, a company may still declare a dividend out of accumulated profits that were earned in previous years and transferred to free reserves — but only on the four conditions in Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014. The rate must not exceed the average of the rates declared in the three immediately preceding years (this test falls away if no dividend was declared in each of those years). The total drawn must not exceed one-tenth of paid-up share capital plus free reserves as per the latest audited financial statement. The amount drawn must first be used to set off the loss of the year. And the reserves left after the withdrawal must not fall below 15% of paid-up share capital. No dividend can come from anything other than free reserves.

An interim dividend is the Board’s decision under Section 123(3), out of the surplus in the profit and loss account, the profits of the year, or the profits generated up to the quarter preceding the declaration. If the company is in loss for the year up to the end of that quarter, the rate cannot exceed the average dividend declared in the three preceding years. Once any dividend is declared, the clock runs: the money goes into a separate bank account within five days, is paid within 30 days, and anything unpaid moves to the Unpaid Dividend Account within the next seven days. Tax is deducted at 10% on dividend paid to residents — under Section 194 of the Income-tax Act, 1961 for payments up to 31 March 2026, and under Section 393(1) of the Income-tax Act, 2025 for payments in tax year 2026-27 — with no deduction where an individual’s dividend for the year does not exceed ₹10,000.

Worked example — a 10% final dividend for FY 2025-26 with thin profits

A company with paid-up share capital of ₹5 crore and free reserves of ₹4 crore made a profit after depreciation of ₹20 lakh in FY 2025-26 and has ₹10 lakh of undistributed profit brought forward. It has no past losses. It declared 8%, 10% and 12% in the three preceding years and wants to hold 10% at its AGM on 25 September 2026.

Inputs

Profit after depreciation, FY 2025-26₹20 lakh

Undistributed profits of previous years₹10 lakh

Paid-up share capital / free reserves₹500 lakh / ₹400 lakh

Proposed dividend10% = ₹50 lakh

Three-year average rate(8 + 10 + 12) ÷ 3 = 10%

Output

Available from profits₹30 lakh

To be drawn from free reserves₹20 lakh

Rule 3(1) — rate ≤ 10% averageMet ✓

Rule 3(2) — one-tenth of (500 + 400) = ₹90 lakhMet ✓ (₹20 lakh drawn)

Rule 3(4) — reserves left ₹380 lakh ≥ 15% of 500 = ₹75 lakhMet ✓

DeadlinesDeposit by 30 Sep 2026 · pay by 25 Oct 2026 · unpaid transfer by 1 Nov 2026

The 10% dividend is permissible, ₹30 lakh from profits and ₹20 lakh from free reserves. At 11% it would fail — not on amount, but because the rate would exceed the three-year average. And because the dividend is paid in October 2026, tax is deducted under Section 393(1) of the Income-tax Act, 2025, even though the dividend relates to FY 2025-26.

Common mistakes

Declaring a dividend with past losses still on the books

The fourth proviso to Section 123(1) requires carried-over losses and unprovided depreciation of earlier years to be set off against the current year’s profit before a dividend is declared. A profitable year does not by itself reopen the door if the accumulated deficit is larger than that profit.

Treating all reserves as available

Only free reserves can fund a dividend. Revaluation reserve, capital redemption reserve, securities premium, and gains recognised on fair valuation are outside Section 2(43) and cannot be drawn on — even where they make the balance sheet look comfortable.

Applying the one-tenth cap to the dividend rather than the amount drawn

Rule 3(2) caps the total amount drawn from accumulated profits, and Rule 3(3) requires that amount to absorb the year’s loss first. In a loss year the amount drawn is the dividend plus the loss, and it is that total which must stay within one-tenth of paid-up capital and free reserves.

Using the Rule 3 carve-out for an interim dividend

Rule 3(1) switches off its rate cap for a company that declared no dividend in each of the three preceding years. The proviso to Section 123(3) has no such carve-out: a company in loss to date with no dividend history has an average of nil, and so cannot declare an interim dividend.

Counting the 30 days from payment instructions, not declaration

The five-day deposit, the 30-day payment window and the seven-day transfer to the Unpaid Dividend Account all run from the date of declaration — the AGM for a final dividend, the Board meeting for an interim one.

Applying the old Act to a dividend for FY 2025-26

TDS follows the date of payment. A final dividend for FY 2025-26 declared at an AGM in August or September 2026 is paid in tax year 2026-27 and is deducted under Section 393 of the Income-tax Act, 2025, not Section 194 of the 1961 Act. The rate and the ₹10,000 individual limit are the same; the section reference and return forms are not.

Declaring an equity dividend while in default on deposits

Section 123(6) bars a company that has failed to comply with Sections 73 and 74 — acceptance and repayment of deposits — from declaring any dividend on its equity shares for as long as the failure continues.

Frequently asked questions

How much dividend can a company declare for FY 2025-26?+

Up to its distributable profit: the profit for FY 2025-26 after Schedule II depreciation, less carried-over losses and unprovided depreciation of earlier years, plus undistributed profits of previous years. Beyond that, a company may draw on free reserves only within the four conditions of Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014. The same rules apply to a dividend for FY 2026-27.

Can a company declare dividend out of reserves if it has made a loss?+

Yes, out of free reserves, subject to Rule 3. The rate cannot exceed the average rate of the three preceding years (unless no dividend was declared in each of them); the amount drawn cannot exceed one-tenth of paid-up share capital plus free reserves; the amount drawn must first set off the loss of the year; and reserves after the withdrawal must not fall below 15% of paid-up share capital.

Is it mandatory to transfer profit to reserves before declaring dividend?+

No. Under the first proviso to Section 123(1), a company may transfer such percentage of its profits as it considers appropriate to reserves before declaring a dividend. The fixed percentages of the 1956 Act regime no longer apply.

What is the limit on interim dividend when the company has a loss?+

The rate cannot exceed the average dividends declared in the immediately preceding three financial years. This applies where the company has incurred a loss in the current financial year up to the end of the quarter immediately preceding the date of declaration — proviso to Section 123(3).

Within how many days must dividend be paid after declaration?+

Within 30 days. The amount must first be deposited in a separate account with a scheduled bank within five days of declaration under Section 123(4). If it is not paid within 30 days, Section 127 makes the company liable to simple interest at 18% a year, and a director knowingly party to the default is punishable with imprisonment up to two years and a fine of at least ₹1,000 a day.

When is unpaid dividend transferred to the Unpaid Dividend Account?+

Within seven days after the expiry of 30 days from declaration — so by the 37th day. Within 90 days of that transfer the company must place a statement of the names and unpaid amounts on its website. Money lying unclaimed for seven years goes to the Investor Education and Protection Fund.

What is the TDS on dividend limit for FY 2025-26 and tax year 2026-27?+

₹10,000. No tax is deducted where the dividend paid to a resident individual shareholder during the year does not exceed ₹10,000 and is paid otherwise than in cash; above that, 10% is deducted on the whole amount. The limit was ₹5,000 until 31 March 2025. For other resident shareholders there is no threshold.

Which section applies to TDS on dividend in 2026-27?+

Section 393(1) of the Income-tax Act, 2025 (Table Sl. No. 7) for dividend paid to residents on or after 1 April 2026, and Section 393(2) for non-residents. Payments up to 31 March 2026 fall under Sections 194 and 195 of the Income-tax Act, 1961.

What is the TDS rate on dividend paid to a non-resident shareholder?+

20% plus applicable surcharge and cess, or the lower rate under the applicable tax treaty where the shareholder furnishes a tax residency certificate and the supporting documents. The ₹10,000 limit does not apply to non-residents.

Can a company pay dividend in kind?+

No. Section 123(5) requires a dividend to be paid in cash — by cheque, warrant or any electronic mode — to the registered shareholder, to his order or to his banker. Capitalising profits to issue fully paid bonus shares is permitted separately and is not a dividend.

Authoritative sources

MCA

Companies Act, 2013 — Section 123 — Sources of dividend, the set-off of past losses (fourth proviso, inserted with effect from 29 May 2015), interim dividend and its loss cap (sub-section (3), substituted with effect from 9 February 2018), the five-day deposit, and the bar while in default on deposits.

MCA

Companies (Declaration and Payment of Dividend) Rules, 2014 — Rule 3 — The four conditions for declaring dividend out of free reserves: the three-year average rate, the one-tenth cap, loss set-off first, and the 15% floor.

MCA

Companies Act, 2013 — Sections 124 and 127 — Unpaid Dividend Account within seven days after the 30-day period, the 90-day website statement, 12% interest on late transfer, transfer to IEPF after seven years; 18% interest and punishment for failure to pay within 30 days.

CBDT

Income-tax Act, 1961 — Section 194; Income-tax Act, 2025 — Section 393 — TDS at 10% on dividend to residents, with no deduction where an individual shareholder’s dividend for the year does not exceed ₹10,000 (limit raised from ₹5,000 by the Finance Act, 2025). Section 393 of the 2025 Act applies to payments from 1 April 2026.

Always confirm against the latest version of the source. Regulations evolve and amendments are common.

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Last reviewed: 2026-10-01 · For informational purposes only — not professional advice.