Section 2(22) → Section 2(40)

Definition of dividend — deemed dividend 2(22)(e) and buy-back clause removed

Section 2(22) of the old Income-tax Act, 1961 · new section 2(40) under the Income-tax Act, 2025

New reference Section 2(40)

Income-tax Act, 1961Section 2(22)

(a)–(d): distributions of accumulated profits, debentures, liquidation, capital reduction
(e) deemed dividend: loan/advance by closely held company to a 10% shareholder or concern in which he has substantial interest
(f) buy-back consideration (1 Oct 2024 onwards)
Exclusions: loans in ordinary course of a lending business, demerger shares etc.

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 2(40)

2(40)(a)–(d): same
2(40)(e): deemed dividend — same 10% voting power test, limited to accumulated profits
2(40)(f) buy-back omitted by Finance Act 2026 from 1 April 2026
Exclusion (v) for group Finance Company/Finance Unit loans continues, tightened by FA 2026 (other entity abroad; country notified)

Applies from tax year 2026-27 (from 1 April 2026).

What changed

Two changes from Finance Act 2026: buy-back is no longer a dividend (2(40)(f) omitted), and the existing exclusion for loans through a group Finance Company/Finance Unit was tightened — the other group entity must be outside India and the parent listed in a country notified by the Central Government.

Practice notes

Deemed dividend still applies only up to accumulated profits.
TDS on dividends: section 393(1) table (old 194).

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

What is section 2(22)(e) in the new Income Tax Act?

Deemed dividend is section 2(40)(e) of the Income-tax Act, 2025, with the same 10% shareholder and accumulated profits tests.

What changed in section 2(22) under the new Income Tax Act?

Is section 2(22) still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 2(22) of the 1961 Act. Section 2(40) of the 2025 Act applies from tax year 2026-27.

Related sections

46A→69Buy-back of shares — back to capital gains, extra tax for promoters (Finance Act 2026)194→393(1)TDS on dividends paid by domestic companies 56→92Income from other sources, including taxable gifts (old 56(2)(x))