The dividend amount received may be lesser than expected due to the application of tax deducted at source (TDS) on dividends declared on equity shares and mutual funds.
The different rates of TDS in different scenarios are as per the below given information:
FOR RESIDENT INDIVIDUALS: | For resident individual who have submitted their valid PAN (linked with Aadhaar) with RTA | - There will be no TDS if the dividend amount is up to ₹ 10,000 from a company under folio(s) in a financial year.
- TDS at the rate of 10% will be applicable if the dividend is greater than ₹ 5,000.
- If form 15G or 15H is filed with the RTA of the company issuing dividends, TDS may be deducted at a lower/NIL rate.
| For resident individual who have not submitted their valid PAN (linked with Aadhaar) with RTA | - TDS of 20% will be applicable if the registrar (RTA) of the company doesn't have the PAN details of the investor in its records.
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FOR NON-RESIDENTS: | For non-resident individuals | - TDS is deducted at 20% on dividend income, subject to beneficial rates under the Double Taxation Avoidance Agreement (DTAA), if relevant documents are provided.
- There is no minimum threshold for non-residents—TDS applies to the entire dividend amount.
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FOR RESIDENT NON-INDIVIDUALS (such as HUF, companies or partnership firms): | If a valid PAN is deposited with the RTA: | - TDS at 10% on the entire dividend income.
- There is no minimum threshold for non-individuals. TDS applies to the entire dividend amount.
| If a valid PAN is not deposited with the RTA: | - TDS will be applicable at 20% on the entire dividend income.
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RELATED FACTS: - It is important to note that this threshold of Rs 10,000 is considered for each distributing company separately, not in aggregate for the total dividends received from multiple companies.
For example:
- An Individual receiving ₹10,000 dividend from Company A: No TDS
- If Mr. A receives a dividend of, say, Rs 5,500 from Company X and Rs 12,000 from Company Y, Company Y will deduct TDS since the threshold of Rs 10,000 is exceeded. In contrast, company X will not deduct TDS.
- An HUF receiving ₹5,000 dividend from Company A: ₹500 TDS (10% of ₹5,000)
- A Company receiving ₹11,000 dividend: ₹1,100 TDS (10% of ₹11,000)
- Dividend income is taxable under the head "Income from other sources." The TDS paid on dividends is part of the tax paid for the financial year. This can be verified in the form 26AS, available on the income tax portal.
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