Difference Between Interim Dividend and Final Dividend: A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. A share of the after-tax profit of a company, distributed to its shareholders according to the number and class of shares held by them is called dividend. The amount and timing of the dividend is decided by the board of directors, who also determine whether it is paid out of current earnings or the past earnings kept as reserve.
The term ‘dividend’ has been defined under Section 2(35) of the Companies Act, 2013. The term “Dividend” includes any interim dividend. It is an inclusive and not an exhaustive definition. According to the generally accepted definition, “dividend” means the profit of a company, which is not retained in the business and is distributed among the shareholders in proportion to the amount paid-up on the shares held by them. Must Check How to apply for DIN.?
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Final dividend
Dividend is said to be a final dividend if it is declared at the annual general meeting of the company. Final dividend once declared becomes a debt enforceable against the company. Final Dividend can be declared only if it is recommended by the Board of Directors of the Company. In accordance with Section 134(3)(k), Board of Directors must state in the Directors’ Report the amount of dividend, if any, which it recommends to be paid.
Interim dividend
Dividend is said to be an interim dividend, if it is declared by the Board of Directors between two annual general meetings of the company. All the provisions relating to the payment of dividend shall be applicable on the interim dividend also.
Difference Between Interim dividend and Final dividend
| Interim Dividend | Final Dividend |
|---|---|
| Not defined under the Companies act | This dividend is paid after the finalisation of account of the year |
| Not defined under Companies act | This dividend is declared by the Board of Directors |
| Can be revoked with the consent of all the shareholders | Cannot be revoked in any circumstances |
| This dividend is recommended by BOD but approved by Shareholders in the General Meeting | Defined under companies act |
| Rate of interim dividend is always less than the rate of final dividend | Rate of final dividend is always higher than interim dividend |
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