Dividend into a separate bank account (5 days)
The duty to move the declared dividend into a separate account with a scheduled bank within five days of declaring it.
Declaration of dividend
Counted from declaration of a dividend, including an interim dividend
- MCA
- MCA event filings
- Not specified
- 2026-09-01
The dividend has to be deposited in a separate account with a scheduled bank within five days of the date of declaration. This is section 123(4), not section 124: a lot of guidance files this duty under the unpaid dividend section, which is the wrong provision. Interim dividend counts, because section 2(35) includes it in 'dividend'.
The five-day separate-account duty is section 123(4). It is frequently cited as a section 124 requirement, which is a different obligation: section 124 deals with what happens to dividend that stays unpaid after thirty days. Getting the citation right matters because the two sections carry different penalties and different clocks.
Deadlines counted from an event
Within 5 days of the date of declaration, deposit the amount of the dividend in a separate account with a scheduled bank, under section 123(4).
The rule
Within 5 days of the date of declaration, deposit the amount of the dividend in a separate account with a scheduled bank, under section 123(4).
Who must comply
- Every company that declares a dividend, including an interim dividend declared by the Board under section 123(3)
- Section 123(4) does not apply to a Government company in which the entire paid-up share capital is held by the Central Government, a State Government or a combination of them, under G.S.R. 463(E) of 5 June 2015, and only where that company is not in default of its section 92 or section 137 filings
Statutory basis
Before you file
- Declare the dividend at the general meeting, or the interim dividend at a Board meeting.
- Work out the total amount of the dividend declared.
- Open a separate account with a scheduled bank as defined in section 2(80).
- Record the date of declaration. This date starts the 5-day window.
How to file
- Open a separate account with a scheduled bank for the declared dividend.
- Transfer the full amount of the declared dividend into that account.
- Complete the transfer within 5 days of the date of declaration.
- Pay the dividend to the entitled shareholders from that account within 30 days of declaration.
- Transfer any amount still unpaid or unclaimed to the Unpaid Dividend Account within 7 days of those 30 days expiring.
A separate account with a scheduled bank, not an MCA filing
If you miss it
Section 123 sets no penalty of its own for the separate-account duty, so section 450 applies: ₹10,000 on the company and on every officer in default, plus ₹1,000 for each day the contravention continues, capped at ₹2 lakh for the company and ₹50,000 for an officer in default. The heavier exposure sits next door in section 127: where the dividend is not paid, or the warrant not posted, within thirty days of declaration, a director knowingly party to the default faces imprisonment up to two years with a fine of at least ₹1,000 a day, and the company pays simple interest at 18 per cent a year for the period of default.
- Section 127 carries five defences, including that the dividend could not be paid by reason of any law, that the shareholder's payment directions could not be complied with and this was communicated to him, and that the right to receive the dividend is in dispute
- Failing to segregate the money is what usually causes the section 127 default, because the dividend is not there to pay when the thirty days run out
Common questions
Is this a section 124 duty?
No. It is section 123(4). Section 124 governs what happens to dividend that remains unpaid or unclaimed after thirty days from declaration, which is a separate duty on a separate clock.
Does an interim dividend need the separate account too?
Yes. Section 123(4) says 'the amount of the dividend, including interim dividend', and section 2(35) defines dividend to include an interim dividend.