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Aug 23,2016

Cash Dividend: Cash dividend is given on face value of the company in cash format to the investors' bank account. A dividend is a payment made by a corporation to its shareholders. Dividend is the part of the earnings of a corporation that is distributed to its shareholders annually. Cash dividend is a taxable income.

Problems
Mr. Rayhanul Kabir purchased 2700 shares of Titas Gas Limited BDT 72 per share. The company declared 25% cash dividend in 2015. Face value of the share is BDT 10. Tax on cash dividend is 10% in Bangladesh if the investor has submitted Tax Identification Number (TIN). An investor has to pay 15% tax on cash dividend if did not submit the TIN. Calculate –

  1. Investment amount of Mr. Mr. Rayhanul Kabir
  2. Cash dividend before tax
  3. Tax amount with TIN
  4. Cash dividend after tax with TIN
  5. Tax Amount without TIN
  6. Cash dividend after tax without TIN

Solutions:

a. Investment amount = Number of Share x Market Price
= 2700 x BDT 72 = BDT 194400

b. Cash dividend before tax = (Number of Share x Face Value) x Dividend Rate
= (2700 x BDT10)x25% = BDT 6750

c. Tax Amount with TIN = Cash Dividend x Tax Rate

     = BDT 6750 x 10%

    = BDT 675
d. Cash dividend after tax = Cash dividend before ta - Tax amount with TIN
   = BDT 6750 -BDT 675

    = BDT 6075

e. Tax Amount without TIN = Cash Dividend x Tax Rate
= BDT 6750 x 15%
= BDT 1012.50

f. Cash dividend after tax = Cash dividend before tax - Tax amount without TIN
= BDT 6750 -BDT 1012.50
= BDT 5737.5

 

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