Should you make investments in Indian company shares, you might get returns including dividends. Many still wonder, though: is there a tax on company dividends? The regulations have evolved recently, and the response is indeed yes. Understanding how dividends are taxed will help you to better allocate your money.
All you need to know in easy language is here.
The Company Dividends:
A firm could distribute some of its earnings to its owners when it makes profit. One refers to this as a dividend. Usually paid in cash, it is straight deposited to your bank account connected to your Demat account.
Is Tax Payable Regarding Company Dividends?
Exactly. Dividend income in the hands of the investor is totally taxable starting on April 1, 2020. Dividends formerly were tax-free for investors, and the firm paid a Dividend Distribution Tax (DDT). That system has been deleted, though.
Today, the shareholder pays their tax on company dividends depending on their income tax bracket.
Dividend Taxed: How?
Dividends tax as “Income from Other Sources”.
The tax rate relates to your slab of income tax.
5%, 20%, 30% – whatever relates to you.
No specific dividend exemption or reduced rate.
For instance, you would pay ₹10,000 as tax on ₹50,000 in profits if your slab rate is 20%.
Dividend TDS—Tax Deducted at Source
Should a company’s dividend income surpass ₹5,000 in a given financial year, they subtract TDS at 10%.
Claiming this TDS while submitting your ITR
You can use Form 15G or 15H to avoid TDS if your income is less the taxable limit.
Dividends from Other Businesses
Should you own foreign firm shares—such as those of Apple, Tesla—the dividend you get is completely taxed in India.
Paid under “Income from Other Sources” at your slab rate
Although foreign taxes may be deducted at source, you may be entitled for credit under DTAA (Double Taxation Avoidance Agreement).
Under the title “Income from Other Sources,” how would one report dividend income?
Using Form ITR-1 or ITR-2 will depend on your income source.
Match Form 26AS with Annual Information Statement (AIS) to prevent mismatches.
Claim it; declare TDS already deducted.
Advice on Managing Dividend Tax Sensibly
Record every dividend you get over the year.
Check Form 26AS’s TDS before submitting your ITR.
Use the various deductions—like 80C, 80D—to lower your total tax load.
If you get sizable profits, schedule your taxes ahead of time to prevent a last-minute frenzy.
In Conclusion
In the hands of the investor, the tax on company dividends is now fully taxable and taxed like any other income. There is no lower or distinct rate; your whole tax will rely on your income slab. Make sure you appropriately report it, claim TDS, and keep Income Tax Department compliance.
