Unfranked Dividend, Franked Dividend, Franking Credit Concept

Example:1 At the time of Issuing Dividend by Company 

Company Tax Rate = 26%

Maximum Company Can Issue Franked Dividend

(1300/26%) X100= $5000 (Gross)

If Company Issued more than $ 5000 Dollars as a Dividend then the Balance Amount is Called Unfranked Dividend

For Example: In the Above case if the Company issue $ 7000 as a Dividend, then 

  If the company Paid Less than $ 5000 as a Dividend then the balance will show as input credit

1. Example: 2 Franking Credit

Per Share companies profit $2.1428

Corporate tax on Profit 30% $0.6428

Per Share Net profit after Tax $1.50

Which is Tax for the company The same is Franking Credit for shareholders 

The Profit will give to shareholder as a Dividend along with Franking Credit 

Example 2a

Individual level ITR @ 19%

The individual received net Dividend from company 1.50 

Franking Credit 0.6428

Taxable Income             2.1428

(DPS + FC)

Tax rate 19% 0.4071

Franking Credit (0.6428)

Tax Refund 0.2357

Example 2b

 Individual level ITR @ 45%

The individual received net Dividend from company 1.50 

Franking Credit 0.6428

Taxable Income             2.1428

(DPS + FC)

Tax rate 45% 0.96426

Franking Credit (0.6428)

Tax Refund 0.32146