Dividend received by resident shareholders are now taxable as per the income tax slab rates. Sec 194 has gained prominence as TDS shall be deducted on dividend by the company issuing and paying dividend to the shareholders.
1. Time of Deduction- TDS to be deducted before making the payment.
2. Deductor- Principal officer of a company which has made the prescribed arrangements for the declaration and payment of any dividend (including dividends on preference shares).
3. Deductee- The shareholder who is an Indian resident.
4. Tax Rate– TDS at a flat rate of 10% shall be applicable on dividends more than Rs 5,000.
5. Threshold Limit : Latest Update- As per the Budget 2025 update, effective from 1st April 2025, the threshold limit of TDS on Dividend has been increased.
| Period | TDS Rate | Threshold Limit |
| Before 01/04/2025 | 10% | ₹ 5,000 |
| On or after 01/04/2025 | 10% | ₹ 10,000 |
If PAN is not furnished, then tax to be deducted at a higher rate.
6. Cases when TDS shall not be deducted-
- No TDS if Form 15G/15H submitted
- No TDS for specified Insurance companies/Mutual Funds and AIF