Section 2(22) → Section 2(38)
Definition of Dividend (Deemed Dividend)
Quick Answer
Section 2(22) of the Income Tax Act, 1961 (Definition of Dividend (Deemed Dividend)) corresponds to Section 2(38) of the Income-tax Act, 2025, effective 1st April 2026. Status: Retained.
What changed for Section 2(22)
The starting point is Section 2(22) of the Income Tax Act, 1961 — definition of dividend (deemed dividend). Includes distributions by a company out of accumulated profits. 2(22)(e) covers loans/advances to shareholders as 'deemed dividend'.
From 1st April 2026, the same subject sits at Section 2(38) of the Income-tax Act, 2025 — retained and renumbered as Section 2(38) of the Income-tax Act, 2025. Retained. The anti-abuse provision for closely held companies giving loans to shareholders remains intact.
For Section 2(22), the practical impact is rated Critical. Prevents tax-free extraction of corporate profits.
Sec 2(22)
Provision Summary
Includes distributions by a company out of accumulated profits. 2(22)(e) covers loans/advances to shareholders as 'deemed dividend'.
Sec 2(38)
Provision Summary
Retained. The anti-abuse provision for closely held companies giving loans to shareholders remains intact.
Key Changes & Highlights
- Data algorithms now automatically flag director loans for Section 2(22)(e) taxation.
Related Sections
Frequently Asked Questions
What is Section 2(22) of the Income Tax Act, 1961 about?
Section 2(22) of the Income Tax Act, 1961 covers definition of dividend (deemed dividend). Includes distributions by a company out of accumulated profits. 2(22)(e) covers loans/advances to shareholders as 'deemed dividend'.
Which section replaces Section 2(22) in the Income-tax Act, 2025?
Section 2(22) of the Income Tax Act, 1961 maps to Section 2(38) of the Income-tax Act, 2025, effective 1st April 2026 (status: Retained). Retained. The anti-abuse provision for closely held companies giving loans to shareholders remains intact.
What is the impact of the change to Section 2(22) under the new tax code?
The transition impact for Section 2(22) is rated Critical. Prevents tax-free extraction of corporate profits.
What should I watch out for when Section 2(22) moves to the 2025 code?
Data algorithms now automatically flag director loans for Section 2(22)(e) taxation. These points are specific to Section 2(22) (Definition of Dividend (Deemed Dividend)).
Disclaimer: This mapping of Section 2(22) (Definition of Dividend (Deemed Dividend)) to Section 2(38) of the Income-tax Act, 2025 is for educational and reference purposes only, based on publicly available drafts and circulars. As Section 2(22) is currently marked Retained, always confirm its treatment with a qualified Chartered Accountant before filing or making compliance decisions.
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