# Transfer to Reserves & Declaration from Free Reserves
## Transfer to Reserves — Now Optional
Before declaring any dividend in any financial year, a company may transfer such percentage of its profits to free reserves as it considers appropriate.
Key points:
- Such transfer is NOT mandatory
- The percentage is at the discretion of the company
- (This is a change from the old Companies Act, 1956 regime which made transfers mandatory)
## Dividend Only from Free Reserves
Dividend shall be declared or paid by a company only from its free reserves.
> No other reserve (e.g., capital reserve, securities premium, revaluation reserve) can be utilised for declaration of dividend.
### What are Free Reserves?
Free reserves are reserves available for distribution as dividend, as per the Balance Sheet — excluding any reserve created from unrealised gains, notional gains or revaluation of assets.