Dividend Income Taxation Post FY 2020-21
After abolition of DDT, dividend is taxed at slab rates from FY 2020-21. Companies deduct 10% TDS under Section 194 above ₹5,000/FY per shareholder. Foreign dividend is taxed at slab plus surcharge (no DTAA relief unless treaty allows).
- 10% TDS above ₹5,000 (Section 194)
- Slab rate taxation in recipient's hands
- Interest paid on borrowed money for shares: deductible up to 20% of dividend
- Foreign dividend: DTAA relief via Section 90/91
- Report under Schedule OS with dividend-paying company PAN
Definition
Dividend Income
What is Dividend Income?
After abolition of DDT, dividend is taxed at slab rates from FY 2020-21. Companies deduct 10% TDS under Section 194 above ₹5,000/FY per shareholder. Foreign dividend is taxed at slab plus surcharge (no DTAA relief unless treaty allows).
Key rules to remember
- 10% TDS above ₹5,000 (Section 194)
- Slab rate taxation in recipient's hands
- Interest paid on borrowed money for shares: deductible up to 20% of dividend
- Foreign dividend: DTAA relief via Section 90/91
- Report under Schedule OS with dividend-paying company PAN
Worked example
₹1.2L dividend from Indian equity: TDS ₹12,000 deducted, added to total income at slab. If in 30% bracket, additional ₹36k tax; net receipt ₹72k plus ₹12k TDS credited.
Which ITR form applies
- ITR-1 (Sahaj) — Up to ₹50 lakh total income
- ITR-2 — No upper limit
- ITR-3 — No upper limit
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