FOR RESIDENT SHAREHOLDERS:

When valid PAN is available in the records of the Company: Tax deduction rate on Dividend – 7.5%#

When valid PAN is not available in the records of the Company: Tax deduction rate on Deividend- 20%

#The tax rate has been reduced from 10% to 7.5% with effect from 14 May 2020 until 31 March 2021 vide CBDT Press release dated 13 May 2020.

Requirements:

Update/Verify the PAN and the residential status as per Act, if not already done, with the depositories (In case of shares held in Demat mode) and with Registrar & Transfer Agents^ (RTA) (In case of shares held in Physical mode)

Note-Tax will not be deducted if the dividend income to a resident Individual shareholder during FY 2020-21 in aggregate does not exceed INR 5,000/-. The said amount mentioned may vary from time to time as may be prescribed by the statute/authorities.

Note-Tax will not be deducted if the dividend income to a resident Individual shareholder during FY 2020-21 in aggregate does not exceed INR 5,000/-. The said amount mentioned may vary from time to time as may be prescribed by the statute/authorities.

Income Tax on Dividends

Documents to be submitted to the Company/RTA to claim tax exemption / Specified tax rate:

When valid PAN is available in the records of the Company Tax deduction rate – 7.5%#
When valid PAN is not available in the records of the Company Tax deduction rate – 20%
#The tax rate has been reduced from 10% to 7.5% with effect from 14 May 2020 until 31 March 2021 vide CBDT Press release dated 13 May 2020. 

Requirements: 

  • Update/Verify the PAN and the residential status as per Act, if not already done, with the depositories (In case of shares held in Demat mode) and with Registrar & Transfer Agents^ (RTA)  (In case of shares held in Physical mode) 

Note-Tax will not be deducted if the dividend income to a resident Individual shareholder during FY 2020-21 in aggregate does not exceed INR 5,000/-. The said amount mentioned may vary from time to time as may be prescribed by the statute/authorities.

Documents to be submitted to the Company/RTA to claim tax exemption / Specified tax rate:
Particular/Category Tax Deduction Rate Requirement*
Submission of form 15G/15H Nil Declaration in Form No. 15G (applicable to any person other than a company or a firm) / Form 15H (applicable to an Individual who is 60 years and above) is to be furnished along with self-attested copy of PAN card. (This form can be submitted only in case the shareholder’s tax on estimated total income for FY 2020-21 is Nil)
Insurance Companies/Shareholders to whom section 194 of the Income Tax, 1961 does not apply Nil Self-declaration that it has full beneficial interest with respect to the shares owned by it along with Self attested copy of PAN card and copy of registration certification issued by the IRDAI.
Submission of lower/nil withholding tax deduction certificate issued by Income Tax Department u/s 197 of Income Tax Act, 1961 Rate specified in the certificate Lower/NIL withholding tax certificate obtained from tax authority. Tax will be deducted at the rate specified in the said certificate, subject to furnishing a self-attested copy of the same. The certificate should be valid for the FY 2020-21 and should cover dividend income
Alternative Investment Fund (Category I and II) Nil Self-declaration that they are specified in Section 10 (23FBA) of the Act and established as Category I or Category II AIF under the SEBI regulations along with self-attested copy of PAN card and registration certificate issued by SEBI.
Mutual Funds Nil Self-declaration that they are specified in Section 10 (23D) of the Act along with self-attested copy of PAN card and registration certificate.
Recognized provident funds, Approved superannuation fund and Approved gratuity fund Nil Self-declaration that they are specified in Circular No. 18/2017 issued by Central Board of Direct Taxes (CBDT) along with self-attested copy of PAN card and registration certificate
Corporation established by or under a Central Act which is, under any law for the time being in force, exempt from income- tax on its income. Nil Self-declaration that they are specified in Section 196 of the Act along with self-attested copy of PAN card and registration certificate.
National Pension Scheme Nil  Self-declaration that they are specified in Section 10 (44) of the Act along with self-attested copy of PAN card and registration certificate.

FOR NON-RESIDENT SHAREHOLDERS:

Particular/Category Tax Deduction Rate Requirement*
Foreign Institutional Investors (FIIs) / Foreign Portfolio Investors (FPIs) 20% (plus applicable surcharge and cess) Update/Verify the PAN and legal entity status as per the Act, if not already done, with the depositories or with the Company’s Registrar and Transfer Agents – Link Intime India Private Limited.
Other Non-resident shareholders 20% (plus applicable surcharge and cess) Update/Verify the PAN, legal entity status and the residential status as per the Act, if not already done, with the depositories (in case of shares held in demat mode) and with the Company’s Registrar and Transfer Agents – Link Intime India Private Limited (in case of shares held in physical mode).
Lower rate prescribed under the tax treaty which applies to the non-resident shareholder (other than investments made under FPI/FII route) Rate as per the applicable Tax Treaty In order to apply the Tax Treaty rate, ALL the following documents would be required:

1) Self-Attested copy of Indian Tax Identification number (PAN).

2) Self-Attested copy of the Tax Residency Certificate (TRC) applicable for the period April 2020 to March 2021 obtained from the tax authorities of the country of which the shareholder is a resident.

3) Self-declaration in Form 10F duly filled and signed.

4) Self-declaration from Non-resident, primarily covering the following:

Non-resident is eligible to claim the benefit of respective tax treaty;

Non-resident receiving the dividend income is the beneficial owner of such income;

No Permanent Establishment (PE) / Fixed base declaration in India;

Non-resident complies with any other condition prescribed in the relevant Tax Treaty and provisions of Multilateral Instrument (‘MLI’) to avail the Tax Treaty benefits;

Non-resident does not have a place of effective management in India.

Application of the beneficial rate of tax treaty for TDS is at the discretion of the company and shall depend upon completeness of the documentation and review of the same by the Company

Submission of Lower/NIL withholding tax deduction certificate issued by Income Tax Department u/s 197 of Income Tax Act, 1961 Rate specified in certificate Lower/NIL withholding tax certificate obtained from tax authority. Tax will be deducted at the rate specified in the said certificate, subject to furnishing a self-attested copy of the same. The certificate should be valid for the FY 2020-21 and should cover the dividend income.
*Application of beneficial Tax Treaty Rate shall depend upon the completeness of the documents submitted by the Non- Resident shareholder and satisfactory review by the Company.

Author Bio

Qualification: CS
Company: Nikunj Chawda
Location: Mumbai, Maharashtra, IN
Member Since: 22 May 2020 | Total Posts: 3

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