Inelastic neutron scattering experiments on Dy11B2C2 and Dy0.07Y0.9311B2C2 have been performed. The results enable us to infer important properties of the crystal-field levels of Dy3+ in DyB2C2 which has fascinating structural and magnetic properties that are attributed to the electronic states of the Dy ion. While no clear excitation was observed in pure DyB2C2, three excitations from the ground state with the energies 1.4, 4.1 and 5.8 meV were observed in Dy0.07Y0.9311B2C2. By comparing the present results with the previous crystal-field calculation, we infer that the ground state of Dy3+ in YB2C2 is T8 which is split into two Kramers doublets by the tetragonal potential. Additionally, the heat capacity measured on the diluted system is compared with a calculation using the low part of the energy level scheme obtained from the neutron experiments. Good agreement between theory and experiment is obtained.