- Prior to Finance Act, 2020, dividend was taxable in the hands of domestic company and this tax was known as Dividend distribution tax.
- Dividend Distribution Tax was exempt in the hands of shareholders.
- But after Finance Act,2020, now dividend is taxable in the hands of shareholder.
- It will be taxable under the head “Income from other sources’”
- It will be charged to tax as per the slab rates applicable to the taxpayer.
- It will be taxable even if taxpayer has a business of investment in securities.
- If taxpayer have taken any loan to invest in the securities, then interest paid on this loan can be claimed as deduction up to 20% of dividend.
- Earlier tax rate of 10% on dividend receipts applicable on resident individuals, HUF and firms in excess of Rs 10 lakh is withdrawn now.
- As per current provisions, in case of resident shareholders, TDS is required to be deducted at the rate of 10% if paid in excess of Rs 5,000 from a company or mutual fund.
- For non-resident persons, TDS is required to be deducted at the rate of 20% irrespective of the amount.
- If an NRI tax payer wants to avail the benefit of lower TDS deduction due to beneficial rate available in Double Taxation Avoidance Agreement (DTAA), he shall have few documentary proofs like tax residency certificate, Form 10F etc with him.
- NRIs can claim refund of extra TDS deducted by filing their tax return at the end of financial year based on their actual income.
- In case an NRI tax payer has only dividend income in India and this income is below INR 2,50,000 then he can claim refund of whole TDS deducted by filing his tax return.
Disclaimer: This article is just to make you understand about very basics of the concepts. Please take Professional advice in case you have any doubts.
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