Interim Dividend vs Final Dividend
An interim dividend is declared and paid by a company's board of directors during the financial year before accounts are finalised, while a final dividend is proposed by the board and approved by shareholders at the Annual General Meeting after the financial year ends.
Companies listed on Indian stock exchanges may distribute dividends at different points in the financial year, and the two principal forms—interim and final—differ in their timing, approval process, and accounting treatment.
An interim dividend can be declared by the board of directors without requiring prior shareholder approval. The Companies Act, 2013 permits the board to declare an interim dividend out of the current year's profits or the surplus in the profit-and-loss account, provided the financial statements for the relevant period are prepared and the company has not incurred losses since the last audited balance sheet that exceed the sum of free reserves, securities premium, and capital redemption reserve. The declared amount must be deposited in a separate bank account within five days and paid to eligible shareholders within 30 days of declaration.
A final dividend, by contrast, is recommended by the board in the annual report and must be approved by shareholders via an ordinary resolution at the Annual General Meeting (AGM). The board's recommendation is not binding on shareholders—they can approve a lesser amount but cannot increase it beyond the board's recommendation. Once approved at the AGM, the final dividend must be paid within 30 days.
For investors tracking corporate actions on NSE and BSE, both interim and final dividends are announced through exchange filings under SEBI's LODR (Listing Obligations and Disclosure Requirements) regulations. The announcement includes the per-share dividend amount, the record date for determining eligibility, and the ex-date (typically one trading day before the record date under T+1 settlement).
Many large Indian companies pay interim dividends after the second or third quarter results to provide shareholders with periodic income, followed by a final dividend at the year-end. Some companies pay only a final dividend, while others pay multiple interim dividends throughout the year. The total dividend yield reported in financial media typically refers to the sum of all interim dividends plus the final dividend paid during the financial year.