Calculate TDS deducted under Section 194 on dividends paid by Indian companies. Rate is 10 percent for residents with PAN. Check net dividend received and ITR refund eligibility.
Calculate TDS on dividend income under Section 194 of the Income Tax Act.
TDS deducted
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Net dividend received
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Actual tax due at slab
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ITR refund / extra tax
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How TDS under Section 194 works
When an Indian company declares and pays a dividend, it deducts TDS before remitting the payment to shareholders. For resident individuals and HUFs with a valid PAN on record, the TDS rate is 10 percent of the gross dividend amount. The threshold is Rs 5,000 per financial year per company: if your total dividend from a single company is Rs 5,000 or less in a year, no TDS is deducted. Above Rs 5,000, TDS applies to the entire amount, not just the excess. The deducted TDS appears in your Form 26AS and Annual Information Statement.
Refund when TDS exceeds your tax liability
The TDS is a withholding mechanism, not the final tax. Your actual tax on dividend income is your slab rate applied to the gross dividend. If you are in the 30 percent slab and TDS was deducted at 10 percent, you owe an additional 20 percent at the time of ITR filing. If you are in the nil slab (total income below Rs 3 lakh under new regime or Rs 2.5 lakh under old regime), the entire 10 percent TDS is refundable. File your ITR to claim the refund; it is not automatic.
Dividend income reporting in ITR
Report all dividend income under the head Income from Other Sources in your ITR (Schedule OS). Include dividends from all listed companies, unlisted companies, mutual fund dividend payouts (if you chose the dividend plan instead of growth), and dividends from foreign companies. Foreign company dividends are taxable in India for residents but TDS rules differ. Advance tax must be paid on dividends if the net tax liability after TDS exceeds Rs 10,000 in a financial year, to avoid interest under Sections 234B and 234C.
Frequently asked questions
What is Section 194 TDS on dividends?
Section 194 of the Income Tax Act requires domestic companies to deduct TDS when paying dividends to resident shareholders. From AY 2021-22 onwards, dividends are taxable in the hands of shareholders at their applicable slab rates, and the company must deduct TDS at 10 percent if the dividend exceeds Rs 5,000 per financial year per shareholder. Before AY 2021-22, dividends were tax-free in shareholders hands because companies paid Dividend Distribution Tax. This change significantly affects HNI investors and promoters receiving large dividends.
What happens if I do not have a PAN linked to my demat account?
If the recipient does not furnish a PAN, TDS is deducted at 20 percent under Section 206AA instead of the standard 10 percent. This is a significant penalty for not having PAN on record. All investors should ensure their PAN is linked to their demat account and folio number. Once a PAN is provided and linked, the rate reverts to 10 percent for future dividends. The excess TDS deducted in the past can be claimed back as a refund when filing the ITR for that assessment year.
Is dividend income fully taxable in India?
Yes. Dividend income from domestic companies is fully taxable for the shareholder at their applicable income tax slab rate. There is no special concessional rate for dividends. If you are in the 30 percent slab and receive a dividend, you owe 30 percent tax on that dividend. The 10 percent TDS is just an advance tax; you pay the balance at the time of ITR filing. If TDS is higher than your actual tax liability (for example, if you are in the nil or 5 percent slab), you get a refund after filing your return.
Can I apply for a lower TDS deduction on dividends?
Yes. Investors who expect their total tax liability to be lower than 10 percent (for example, senior citizens with income below the basic exemption limit, or individuals in the nil or 5 percent slab) can submit Form 15G (for non-senior citizens) or Form 15H (for senior citizens above 60 years) to the company or its registrar before dividend payment. This self-declaration requests the company to deduct nil or lower TDS. The form is valid for one financial year and must be submitted afresh each year.