Dividend Calculation as per Companies Act 2013
Work out the dividend per share and total payout from the declared rate, and check whether the company has sufficient distributable profits to declare it under Section 123.
Inputs
Availability of profits (Section 123)
Result
How dividend is computed under Section 123
Dividend per share = Face value × Rate%Total dividend = Dividend per share × Number of shares
Dividend may be paid out of the current year's profits after providing for depreciation, out of accumulated profits, or both. Transfer of profits to reserves before declaring dividend is voluntary under the 2013 Act.
Frequently asked questions
How is dividend calculated as per Companies Act 2013?
Dividend per share = face value × declared rate percentage. Total dividend = dividend per share × number of shares. The rate is applied on face value, not market price.
Out of what can dividend be declared under Section 123?
Out of the current year's profits after providing for depreciation, out of accumulated profits of previous years, or both. Where profits are inadequate, declaration out of free reserves follows the Companies (Declaration and Payment of Dividend) Rules, 2014.
Is transfer to reserves mandatory before declaring dividend?
No. Under the Companies Act, 2013 transfer of a percentage of profits to reserves is voluntary — the company decides the amount, if any.
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