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Threshold limits for deduction of tax at source from income by way of dividends and income from units

General Circular No. 21/2002

No.17/36/2002-CL.V

Government Of India

Ministry Of Finance And Company Affairs

Department Of Company Affairs

5th Floor, ‘A’ Wing, Shastri Bhawan,

New Delhi – 110 001.

Dated 12th September, 2002.

To

All Chambers of Commerce & Industry

(As per standard list)

Subject:- Threshold limits for deduction of tax at source from income by way of dividends and income from units.

 Sir,

A copy of the Circular No.6/2002 dated 2nd August, 2002 (F.No.133/1/2002-TPL) issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (TPL) Division) is enclosed for your information and record.

Yours faithfully,

(E. Selvaraj)

Joint Director (T)

Circular No. 6/2002

F.No.133/1/2002-TPL

Government of India

Ministry of Finance

Department of Revenue

Central Board of Direct Taxes

(TPL Division)

New Delhi, the 2nd August, 2002

To,

All the Chief Commissioners/Directors General of Income-tax.

Subject: Threshold limits for deduction of tax at source from income by way of dividends and income from units.

Sir/Madam,

The Finance Minister in his Speech in the Lok Sabha on 31.7.2002 made the following announcement:

“Dividend income from shares of Indian companies and income from units of mutual Funds have been made taxable in the hands of share/unitholders by the Finance Act, 2002. For small investors investing in equity, a threshold limit of Rs.1,000 was provided for the purpose of TDS. Let us for senior citizens and for investors raise the threshold limit to Rs.2500. Thus, no tax will be deductible in respect of dividend upto Rs.2500, received from each company, or a mutual fund. With the computerisation of the Income Tax Department, data on TDS will be synchronised with the income ‘returned’ by the assessee for better tax administration and compliance.”

2. With a view to give effect to the announcement made by the Finance Minister in his Speech in the Lok Sabha, it is clarified that the threshold limit for the purpose of tax deduction at source from income by way of dividends under section 194 and income in respect of units under section 194K of the Income-tax Act shall be Rs.2,500/- (Rupees two thousand five hundred) with immediate effect. In other words, no tax would be deductible from dividend received from a company or income from units of a Mutual Fund, by a shareholder or unitholder, if the dividend or income from units, as the case may be, does not exceed Rs.2,500/-.

3. The contents of this Circular may be brought to the notice of all the officers working in your region.

(DEEPIKA MITTAL)

Under Secretary (TPL-III)

Tel: 3092742

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