# Deposit of Dividend Amount & Interim Dividend

## Mandatory Deposit in Separate Bank Account

The amount of dividend (including interim dividend) shall be deposited in a scheduled bank in a separate account within 5 days from the date of declaration.

> Exemption: This requirement does NOT apply to a Government Company.

## Interim Dividend

The Board of Directors may declare interim dividend during any financial year.

### Permitted Sources of Interim Dividend

From:

1. Surplus in the Profit & Loss Account, OR

2. Profits of the financial year in which the interim dividend is sought to be declared, OR

3. Profits generated in the financial year till the quarter preceding the date of declaration of interim dividend.

### Special Restriction — Loss During Current Year

If the company has incurred a loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend:

> Interim dividend shall NOT be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years.

## Quick Comparison

Feature	Final Dividend	Interim Dividend
Declared by	Shareholders in AGM	Board of Directors
Frequency	Once a year	Any time during FY
Recommendation	Board recommends, shareholders approve	Board alone

⚠️ Common exam mistakes

Forgetting the 5-day window to transfer the declared dividend to a separate scheduled bank account.
Assuming Government Companies must also follow the 5-day deposit rule — they are exempt.
Believing only shareholders can declare interim dividend — it is declared by the Board.
Ignoring the loss-restriction: if there is a loss till the end of the preceding quarter, the rate cannot exceed the 3-year average.
Confusing the 'previous quarter profits' rule with the 'previous year profits' rule — interim dividend can use profits up to the quarter preceding declaration.

Bare-Act text Section 123(3) and Section 123(4), Companies Act, 2013 · The Companies Act, 2013 · click to expand

Section 123(3): The Board of Directors of a company may declare interim dividend during any financial year or at any time during the period from closure of financial year till holding of the annual general meeting out of the surplus in the profit and loss account or out of profits of the financial year for which such interim dividend is sought to be declared or out of profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend: Provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years. Section 123(4): The amount of the dividend, including interim dividend, shall be deposited in a scheduled bank in a separate account within five days from the date of declaration of such dividend.

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Deposit of Dividend Amount & Interim Dividend (Section 123)

⚠️ Common exam mistakes