Definition
- Dividend refers to a reward, cash or otherwise, that a company gives to its shareholders.
- Dividends can be issued in various forms, such as cash payment, stocks or any other form.
- A company’s dividend is decided by its board of directors and it requires the shareholders’ approval.
- However, it is not obligatory for a company to pay dividend. Dividend is usually a part of the profit that the company shares with its shareholders
- The dividend is simply an equity (and preference) shareholders profit share in the company and section 194 calls for the deduction of tax on such dividend income given to shareholders.
Who is responsible to deduct tax u/s 194:
The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of any dividend (including dividends on preference shares) to a shareholder, who is resident in India, is required to deduct tax at source
Threshold limit u/s 194 of Income Tax Act:
- No deduction upto Rs. 5000, if dividend is paid by any mode, other than cash.
- TDS shall be deducted before making payment of dividend.
Rate of TDS under Section 194:
- Tax is to be deducted at the rate of 10%.
- If the recipient of income doesn’t furnish his PAN to deductor, then TDS is to be deducted at the rate of 20%.
- If dividend paid to Non-Resident then TDS rate applicable @20% including surcharge and cess.
Due date of TDS deposit and Filing of TDS returns:
The Deductor is liable to deposit TDS with the Government with following dates
| Particulars | Due date of Deposite |
|---|---|
| April-February | 7th of Next following next Month |
| March month | 30th April |
The Deductor is liable to File TDS Returns with the Government with following dates
| Quarter | Due Date for Return |
|---|---|
| April to June | 31st of July |
| July to September | 31st of October |
| October to December | 31st of October |
| January to March | 31st of May |
Important Notes on Dividend Income:
- The dividend distribution tax has been eliminated
- The dividend has been taxed in the hands of shareholder
- The dividend exemption limit of Rs 10,00,000 has been removed.
- The dividend surcharge has been set at 20%
- Interst expenses against divident income is limited to 20% of dividend income.
- Dividend received on or after April 1st,2020 on which DDT has been already been paid , are not subject to taxation again.
