ITR Filing: There have been many changes in the rules for filing income tax returns for the assessment year 2022 (FY 2021) and one of the important changes in these changes is to provide the information of dividend income. There has been a change in the rules related to disclosure of dividend income in ITR filing. If the taxpayer has received dividend income in the previous FY 2021, then it is important to keep an eye on these changes to ensure that there is no mistake in the ITR.
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Earlier, tax was not to be paid on dividend
Taxpayers were not required to pay any tax on dividend income up to Rs 10 lakh in any year prior to FY 2021 as the organizations were required to pay Dividend Distribution Tax (DDT) before paying the dividend. Taxpayers had to pay tax at the rate of 10 per cent on dividend income above Rs 10 lakh. Now from the financial year 2021, these rules have changed and the dividend distributed by the organization has been brought under the tax net. Apart from this, under the new rules, if any resident shareholders get dividend in any financial year more than Rs 5000, then it will be the responsibility of the domestic firm to deduct TDS at the rate of 10 percent.
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Dividend to be shown as ‘Income from other sources’
Before FY 2021, dividend income was disclosed under ‘exempted income’ but now under the new rules, it will have to be reported under ‘Income from other sources’ under section 56(2) (i).
Dividend income will have to be reported on quarterly basis
Taxpayers will have to pay advance tax in the same quarter in which the dividend is received. For calculation of interest in case of default in payment of advance tax liability, the dividend received during the entire financial year will have to be reported on quarterly basis. This means dividend received between 1st April 2020 to 15th June 2020, dividend received from 16th June to 15th September 2020, dividend received from 16th September to 15th December 2020, 16th December 2020 to 15th March 2021 and 16th March 2021 The information about the dividend received till 31 March 2021 will have to be given separately.
Earlier it was not possible to disclose the dividend income in advance, so there was no penalty for non-payment of advance tax on it. However, from this year onwards, the Income Tax Department has made it mandatory for all the organizations to give the information about the dividend paid to the department and this information is pre-filed by the taxpayers. In such a situation, when you get pre-filled data in ITR, then go through all the information given in it carefully.
(Article: Amit Gupta, Co-Founder and MD, SAG Infotech)
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