"Tax benefits is available only in case of payment of interest and not on the payment of preference dividend." Why?

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Solution

Interest is an expense while dividend is an appropriation

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Similar questions

Payment of fixed rate of dividend to preference shares may enable a company to declare higher rates of dividend for the equity shareholders in good times.

Q. Tax payments to the government do not provide any direct benefit to the tax payer.

Differentiate between equity shares and preference shares on the basis of :

(a) Payment of dividend

(b) Refund of capital

(d) Voting Rights

Q. Assertion :Dividend payable on preference shares are not tax-deductible Reason: Preference dividend is not a charge on earnings or an item of expenditure; it is an appropriation of earnings

Q. If DFL of a firm is 1.61 EBIT is Rs.25,000 and the interest component is Rs.7,000 the dividend on preference shares that the firm paid assuming a tax rate of

30 %

is ____________.

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