Under Section 123 Companies Act 2013, a dividend may be declared and paid by a company only OUT OF:

1. Section 123(1) Companies Act 2013 prescribes that no dividend shall be declared or paid by a company for any financial year except — (a) out of the PROFITS of the company for that year arrived at after providing for depreciation in accordance with sub-section (2); (b) out of the profits of the company for ANY PREVIOUS financial year(s) arrived at after providing for depreciation and remaining undistributed; (c) out of BOTH (a) and (b); (d) out of money provided by the Central Government or a State Government for the payment of dividend by the company in pursuance of a guarantee given by that Government. 2. PROVISO: A company may, before declaring dividend, transfer such percentage of profits to its reserves as it considers appropriate. 3. Section 123(2) requires depreciation in accordance with Schedule II. 4. Hence option B is correct. _Source: Companies Act 2013 (Act 18 of 2013), Govt. of India MCA — Companies Act 2013, Section 123(1)_