After the withdrawal of the dividend distribution tax (DDT), the dividend income held by the investors has become taxable. Because of this, tax deduction at source (TDS) is applicable to dividend payout under section 194 of the Income Tax Act. Accordingly, 10% TDS will be applicable on the dividend income of more than five thousand in a financial year, if the investor PAN is available. If PAN is not available, the TDS rate will be 20 percent.
TDS details now available on Form 26AS
Details of dividend income and TDS will now be available on the new format of Form 26AS, which will make it easier to file income tax return (ITR) and it will be difficult to suppress income. However, if the person has a dividend income of only Rs 2.5 lakh or the total income, which includes the dividend income, is not taxable, then it will become necessary to file the return of income. The reason for this is to claim TDS on tax deduction and dividend income back as tax refund.
The good news is that like a bank fixed deposit (FD), you can now also submit Form 15G (for individuals up to 60 years of age) or Form 15H (for senior citizens), which will ensure that your dividend income But there is no TDS charge, if the total income in the financial year is not beyond the 2.5 lakh figure.
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For dividend on shares, a person can submit Form 15G or Form 15H, as appropriate, directly to the company. In case of dividend payout option on mutual fund schemes, the appropriate form can be submitted directly to the Asset Management Company (AMC) or their Registrar and Transfer Agent (RTA) such as CAMS and KFintech (Karvy’s branch).
The appropriate Form 15G or Form 15H can be submitted online by visiting the sites of companies, AMCs or RTAs. In the event of applying for MF schemes through their RTAs, the details to be entered are – PAN, Fund House (AMC) name, folio number etc.
If your total income is not taxable and IDCW is part of it, you should submit Form 15G / H soon. If not, once you apply TDS on it, you will have to file your ITR on getting the dividend.
(Story: Amitava Chakrabarty)