Income Tax On Dividend


A dividend is a payment that you get assuming you put resources into shares or common assets. Many offers and shared store plans circulate the procured gets back to financial backers as profits. Since profits got are a kind of pay, a significant number of you keep thinking about it regardless of whether such profits would be burdened in your hands.

Meaning Of Dividend

Dividend typically refers to the appropriation of benefits by an organization to its investors.

In any case, considering Section 2(22) of the Income-charge Act, the profit will likewise incorporate the accompanying:

(a)  Distribution of gathered benefits to investors involving the arrival of the organization’s resources;

(b) Distribution of debentures or store endorsements to investors out of the aggregated benefits of the organization and issue of extra offers to inclination investors out of amassed benefits;

(c) Distribution made to investors of the organization on its liquidation out of gathered benefits;

(d) Distribution to investors out of collected benefits on the decrease of capital by the organization;

(e) Loan or advance made by a firmly held organization to its investor out of collected benefits.

Sources Of Dividend

You can get dividends from the accompanying sources –

  • From a homegrown organization to whose shares, you have contributed.
  • From an unfamiliar organization to whose shares, you have contributed.
  • From value shared reserves assuming that you have picked the profit choice.
  • From obligation common assets on the off chance that you have picked the profit choice.

Tax On Dividend Income

Taxability of profit will rely on whether the profit beneficiary arrangements in protections either as a merchant or as a financial backer. The pay acquired by the individual from the exchanging exercises is available under the head business pay. Subsequently, if offers are held for the end goal of exchanging, the profit pay will be available under the head pay from business or calling. Though, on the off chance that offers are held as speculation, pay emerging in the idea of profit will be available under the head of pay from different sources.

Where the profit is assessable to burden as business pay, the assesses can guarantee the derivations of that large number of consumptions which have been caused to procure that profit pay, for example, assortment charges, interest on credit, and so on. While assuming the profit is available under the head of pay from different sources, the assesses can guarantee an allowance of just revenue consumption which has been brought about to acquire that profit pay to the degree of 20% of complete profit pay. No derivation will be taken into consideration some other costs including commission or compensation paid to a financier or some other individual to acknowledge such profit.

Tax Rates On Dividend Income

Charge Rates on profit rely on the kind of assesses getting the profit and the instrument on which the profit is conveyed. This can be effectively justifiable through the following table: –

Category of Assesses



Dividend nature rate Rate of Tax
Resident A dividend received from a domestic company The normal rate of tax applies to the assesses.
NRI Dividend on GDR of Indian co./PSU (purchased in foreign currency) 10%
NRI Dividend on shares of Indian co. (purchased in foreign currency) 20%
NRI Any other Dividend income 20%
FPI Dividend on securities other than 115AB 20%
Investment Division of the offshore banking unit Dividend on securities other than 115AB 10%


When To Tax Dividend Income?

Section 8 of the Act gives that the last dividend including considered profit will be available in the year in which it is pronounced, disseminated, or paid by the organization, whichever is prior. Though, a break profit is available in the earlier year in which how much such profit is genuinely made accessible by the organization to the investor. As such, an interval profit is chargeable to burden on a receipt premise.

Advanced Tax And Dividend Income

On the off chance that the shortage in the development charge portion or the inability to pay something very similar on time is by profit pay, no interest under segment 234C will be charged given the assesses have paid full duty in resulting advance expense portions. In any case, this advantage will not be accessible regarding the considered profit as alluded to in Section 2(22)(e).