BMC Associates says Replied on 12th September,2026 04:11 PM

When a holding company acquires shares in a subsidiary during the year, dividend received from the subsidiary needs to be split into pre-acquisition dividend and post-acquisition dividend. 1. Pre-acquisition dividend A dividend relating to profits earned by the subsidiary before the holding company acquired the shares is treated as a capital receipt for the holding company. It is generally deducted from the cost of investment in the subsidiary, rather than being treated as income. Example: Holding company purchases shares on 1 October. The subsidiary declares a dividend in December out of profits earned before 1 October. ➡️ This is pre-acquisition dividend → reduce the cost of investment. 2. Post-acquisition dividend Dividend relating to profits earned after the acquisition is treated as revenue income of the holding company. ➡️ It is credited to the Statement of Profit & Loss as dividend income, subject to the applicable accounting framework. Simple rule Pre-acquisition dividend → Capital receipt → Reduce investment cost Post-acquisition dividend → Revenue receipt → Dividend income The exact treatment can differ depending on whether you're preparing separate financial statements or consolidated financial statements and whether AS or Ind AS applies. This is an area where guidance from chartered accountant firms in gurgaon, a chartered accountant gurgaon, a ca firm in gurgaon, or a ca in gurgaon can be useful.