Taxability of Dividend from F.Y 2020-21 for Shareholders-
From F.Y 2020-21, Section 10(34) has been withdrawn-Exempting dividend Income from taxation.
Also earlier Section 115BBDA that provided taxability of dividend over Rs 10 lakhs is of no relevance in hands of shareholders.
Taxation of Dividend in hands of shareholders- Dividend can be taxable under head- Income from other sources or Business Income…It means if shares are held for trading purposes then business income and if shares are held as an investment then taxable as Income from other sources.
Deduction from Dividend Income- Depending upon nature of income- Assessee can claim deductions of all expenditures which have been incurred to earn that dividend income such as interest on loan,collection charges etc in case taxable as business income.
Also Assessee can claim deduction to extent of 20% of total dividend income but deduction related to interest expenditure only. No deduction shall be allowed for any other expenditure.
Now Next question Tax Rate of Dividend- Dividend shall be taxable at normal tax rates as applicable except-
- Resident Individual being employee of indian company or subsidiary engaged in IT,Entertainment ,pharmaceutical or bio-technology industry receives dividend in respect of GDRs issued by such company under Employees Stock option Scheme …dividend shall be taxable at rate of 10 % without any deduction under income tax act.
Obligation of Indian Companies- As per new provisions, An Indian Company is required to deduct tax at source u/s 194 & 195 in case of residents and non –resident shareholders respectively. Indian company may be listed company or unlisted company.
Section 194- Rate of TDS is 10 % and Threshold limit is Rs 5000 for dividend paid other than cash only for Resident Individual. Due to outbreak of COVID-19 pandemic rate of TDS REDUCED to 7.5% instead of 10% w.e.f 14.05.2020 and shall be applicable till 31.03.2021.
The threshold limit does not apply in case the shareholder is a HUF, FIRMS, COMPANY, TRUSTS ETC. i.e TDS is required to be deducted on entire dividend amount. Further threshold limit of Rs 5000 apply only when dividend is paid other than cash. Also, if shareholder does not provide PAN to company then rate of TDS shall be increased to 20 %.
Shareholders exempt from TDS- NO TDS is required to be deducted when shareholder is the following insurance companies-
- Life Insurance Corporation of india
- General Insuarnce Corporation of India
- Any other insurer
- In respect of shares owned by it.
- Further, NO TDS on dividend on filling of FORM 15G/FORM 15H to the company paying the dividend.
- A non-resident individual cannot furnish FORM 15G OR FORM 15H.
- NO tds on dividend on furnishing of lower/NIL tds certificate u/s 197.
- NO tds on dividend paid to Mutual Funds and Insuarnce companies.
Section 195- In case recipient shareholder is a non-resident shareholder then tax shall be deducted under Section 195.Dividend payment to non –resident shareholders is subject to withholding tax at rate of 20% increased by surcharge and health and education cess of 4%. A lower rate for tax may apply if benefit of the tax treaty /DTAA is available to shareholders.
TDS @ 20% on dividend paid to Foreign Institutional Investors or Foreign Portfolio Investors u/s 196C/196D of the Income tax Act.
Rate of surcharge in case of non –resident individuals/HUF/AOP/BOI-
| Amount of Dividend | Section 195 | Section 196C/196D |
| UP TO Rs 50lakhs | Nil | Nil |
| 50lakhs-1 crore | 10% | 10% |
| 1 crore-2 crore | 15% | 15% |
| 2 Crore-5 crore | 15% | 25% |
| Above 5 crore | 15% | 37% |
Rate of surcharge in case of Non resident companies-
| Amt of dividend | Rate of surcharge |
| Up to Rs 1 crore | Nil |
| 1 crore-10 crore | 2% |
| Above 10crore | 5% |
Health & Education cess @4% shall be applicable in all cases.
Important point to remember- TDS shall be deducted at the time of making payment to shareholders and not when dividend is declared.
Queries/doubts mailed at mamta0581@gmail.com
Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.
Author Bio
I have some doubts regarding the dividend I earned in the last FY.
I have the following doubts :
Can the dividend income be shown in business income ? If yes what will be the process.
I also read that we can deduct 20% dividend income and show it as interest on loan amount to buy that equity share ( that is paying the dividend).
In this case do we need to have a proper loan, or can I assume loan was taken from my father. Do I need to fill his PAN no and that interest will be added as his income ?
Dividend is the amount which left in the hands of the companies after paying full tax. Then why it is subject to DDT or taxable in the hands of Shareholders? Isn’t it Double Taxation? Shareholder is the owner of the company and when company already pays tax on its income, why there is another taxation game? Why our tax experts not able to raise this simple logic and concern and get it permanently removed from Income tax Act? What nonsense is going on account of allowable expense upto 20% of gross dividend? It’s a pure & clear loot.
Hello , I received dividend + IPO restri of total 85000 out of which TDS cut is 52000 by company. How can I save this deduction made by company? This amount is given to whom as it is not considered in Form 16.
Dividend income INR 1.5 Lac. FY-21-22
TDS deducted by co INR 15000/-
My taxable income INR 10.0 Lacs
Please calculation tax payable this yr.
Shares are held in the name of partners in partnership Firm . Tax has been deducted in the name of partner but dividend Income is disclosed in Income of Partnership Firm how to claim TDS in Firms Return of Income
If dividend tax is paid for declaration of dividend for the financial year 2020- in oct 20 on 15/10/2020 whether TDS is to be made
I received Rs.15581.70 being dividend against unlisted shares. The company deducted Rs.1168.63 as TDS..
Whether I should add the dividend amount received in total income and pay IT at the applicable rate ?
Yes, you have to add the dividend income to your total income and the same (Div. Income) will be taxed as per your tax brackets.
Need a clarification pl- I have received dividend income from various stocks in FY2021. Some are above INR 5000 and a TDS of 7.5 % deducted. Some are less than INR 5000 and there is no TDS. Do I have to compute the total dividends received across companies and calculate the tax for the amount excess of INR 5000 based on slab tax rate ? OR Is the tax applicable only for dividends where TDS is already applied? Pl clarify. Thanks
Hi sir thank you all team taxguru for valuable guidance, I observed only questions by readers, there is NO answer either from writer or taxguru expert team to understand question is unsolved to understanding is correct or not
I have received dividend from equity as well as from UTI mf. TDS has also been deducted. I shall be thankful to know about taxability of dividend and refund.
Wrong Surcharge rates
I purchase equity 1 day before ex- dividend date , i received dividend amount after deduction of TDS in my broker’s Account , Now question is TDS will Credited to Broker’s Account or Mine ? as on date it is not reflected on my 26AS .
I got dividend from different public Ltd company to the extent of rs 11000 whether it is taxable
TDS should be credited to your account.
For NRI individuals, whether dividend income will be added to all other taxable incomes and taxed at slab rates or dividend is taxed at separate special rate of 20% (TDS rate)?
If I am opting old tax rate for fy 20-21 then I can get exemption on divided income. What will be step infilling new return
Diviend Exemption u/s 10(34) is withdrawn for the fin yr 2020-21. whether you opt for the old scheme or New scheme Dividend is Taxable in excess of Rs 5000
If my total income (from salary) is more than 10lacs and I got dividend rs. 4000, I need to declare as an Other source income. Please confirm.
I am an individual AD the Kartha of my HUF ( of me, spouse and 2 daughters). I wish to transfer some shares from my Individual Account to my HUF. What is procedure ?
Can it be done by off market transfer. Is so, what will be construed later as cost of aquisition of these shares in the hands of the HUF ??
If annual income from all sources including dividend income is below taxable income, is it necessary to pay taxes for dividend income ?
If dividend for FY 2020-21 received during FY 2021-22, then how it is to be account? Will it go to Tax of FY 2020-21 or taxes of FY 2021-22? Kindly clarify.
DIVIDEND IS TAXABLE ON RECEIPT BASIS
I am a resident individual received dividend from domestic company amounting Rs. 11000. Is it chargeable to Income Tax at normal tax rate or it is chargeable @10%.
NORMAL RATE
Is TDS applicable on dividend from equity shares and mutual funds for FY 2021 – 2022
YES.
Very nice article covering all points related to heading of this article.
Thanks for very enlightening artcle
kindly give information how capital gain tax on share and MF trading
Can you please explain in some more details as to what should be understood about the applicability of threshold limit of Rs. 5000/- if the dividend is paid “OTHER THAN CASH”. Thanks in advance.
Very useful