Domestic Company – Meaning – S.2(22A) Income Tax

Definition of ‘Domestic Company’ – Income Tax

As per S.2(22A) of the Income Tax Act, 1961, unless the context otherwise requires, the term “domestic company” means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income.

It may be noted that there are provisions of differential treatment based on residential status thereof under Income Tax. From the tax treatment point of view, a company may be a domestic company or a foreign company. However Income Tax Act defines few other similar terms also, like  ‘Indian Company’, ‘Company’, ‘A Company in which Public are Substantially Interested’, etc.

‘Domestic Company’ term needs to be distinguished from the term ‘Indian Company’. All Indian Companies are treated as ‘Domestic Company’ under Income Tax but vice-versa is not true. Even a ‘Foreign Company’ which makes prescribed arrangements for payment of dividends in India shall also be treated as Domestic Company.

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