The provisions relating to TDS on dividend payments have been restructured under the Income-tax Act, 2025. The earlier Section 194 of the Income-tax Act, 1961 is now covered under Section 393(1) [Table: Sl. No. 7], effective from 1st April, 2026.
This restructuring retains the provisions relating to deduction of tax at source on dividend income while incorporating the updated threshold limits as per recent amendments.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 393(1)
- Table Reference: Table: Sl. No. 7
- Nature of Payment: Dividend (including dividend on preference shares)
- Earlier Section (IT Act 1961): Section 194
- Return Form: 26Q
- Code (for return filing): 1029
Applicability of TDS on Dividend
TDS is required to be deducted on dividend income distributed by a company to its Indian resident shareholders. Such income is taxable in the hands of the shareholder as per applicable income tax provisions.
The responsibility to deduct tax lies with the principal officer of the company responsible for the declaration and payment of dividend, and the provisions apply to the Indian resident shareholder receiving such income.
Time of Deduction
TDS is required to be deducted before making payment of dividend to the shareholder.
Rate of TDS
- 10% on dividend income
- 20% where PAN is not furnished, as per applicable provisions
Threshold Limit
The threshold limit for deduction of TDS on dividend is ₹10,000 in a financial year.
Cases Where TDS is Not Required
- Where a valid declaration in Form 121 (previously Form 15G/15H) is furnished
- Dividend paid to specified entities such as:
- Insurance companies
- Mutual funds
- Alternative Investment Funds (AIF)
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