# Types of Dividends
## 1. Interim Dividend
### Declaration
- Who: Board of Directors
- When: Any time between closure of FY and the AGM
### Sources of Interim Dividend
The Board may use any of:
1. Surplus in P&L account
2. Profits of current FY
3. Profits up to the quarter preceding the declaration date
### Ratification
Must be ratified by members at the ensuing AGM.
### If Current Year Shows Losses
Interim dividend cannot exceed the average rate declared in the previous 3 financial years.
### Separate Bank Account
Dividend must be deposited in a separate bank account within 5 days of declaration.
### Applicable Provisions
All provisions applicable to final dividend also apply to interim dividend.
## 2. Final Dividend
### Declaration
- Who: Members at the AGM
- On: Recommendation by the Board
### Rate Limitation
The rate recommended by the Board cannot be increased by members. Members may:
- Approve at recommended rate, OR
- Approve at a lower rate, OR
- Disapprove altogether
## Comparison Table
| Basis | Interim Dividend | Final Dividend |
|---|---|---|
| Definition | Declared and paid during an accounting year (before finalisation of accounts) | Recommended by Board and approved by shareholders at AGM after close of FY |
| Declared By | Board of Directors | Shareholders (on Board recommendation) |
| Timing | Between FY close and AGM | At the AGM |
| Source | Surplus in P&L, current year profits, profits up to preceding quarter | Profits / Reserves as per Sec 123 |
| Ratification | Required at AGM | Not applicable (declared at AGM itself) |
| Cap if Loss in Current Year | Average of past 3 years' rates | N/A |
| Bank Account | Separate account within 5 days | Same rule applies (Sec 123) |
## Practical Sequence
```
FY Closes → Interim Dividend (Board) → AGM → Final Dividend Declared + Interim Ratified
```