Dividend Tax in India —
Taxable at Your Slab Rate
How dividends from shares, mutual funds and foreign companies are taxed after the DDT abolition, the 10% TDS under Sections 194 and 194K, and exactly how to report dividend income in your ITR.
Dividends from Indian companies are fully taxable in the shareholder's hands at their slab rate since Budget 2020 abolished the Dividend Distribution Tax (DDT) from 1 April 2020. The company deducts 10% TDS under Section 194 if your dividend exceeds Rs 10,000 a year; mutual-fund IDCW payouts attract 10% TDS under Section 194K above Rs 5,000. Foreign-company dividends are taxed at 20% under Section 115A (or slab). The rate does not change between the old and new regime — report it all under Income from Other Sources.
Unlike deductions such as 80C or HRA, dividend income is taxed at your slab rate under both the old and the new (default) regime. Choosing the new regime does not make dividends cheaper — only the slab that applies to your total income changes the tax.
Dividend Taxation — All Types (FY 2025-26)
Every common dividend source, who is taxed, the rate and the TDS section. Report each under Schedule OS in your income-tax return.
| Dividend source | Taxable in | Tax rate | TDS section | TDS rate & threshold |
|---|---|---|---|---|
| Indian listed / unlisted company | Shareholder | Slab | Section 194 | 10% if > Rs 10,000/year |
| Mutual fund (IDCW payout) | Investor | Slab | Section 194K | 10% if > Rs 5,000/year |
| Foreign company dividend | Recipient | 20% (115A) or slab | Source-country TDS | DTAA relief may apply |
| REIT / InvIT distribution | Unitholder | By component | Section 194LBA | 10% on interest component |
| Deemed dividend — loan to shareholder | Recipient | Slab · s.2(22)(e) | Section 194 | 10% on deemed dividend |
Growth-option mutual funds pay no dividend — only IDCW (dividend) options attract 194K. Surcharge on dividend is capped at 15%.
DDT Abolition — Before & After April 2020
Budget 2020 scrapped the Dividend Distribution Tax and moved the tax burden from the company to the shareholder. This is why high-slab investors now pay more on dividends than they did under DDT.
Before 1 Apr 2020 (DDT era)
- Company paid DDT ~20.56% before distributing
- Dividend was tax-free in shareholder's hands up to Rs 10L
- No TDS on dividend — DDT already paid
- MF paid DDT; investor got a tax-free payout
From 1 Apr 2020 (current)
- Company pays no DDT
- Shareholder pays tax at slab rate in the ITR
- 10% TDS u/s 194 (shares) & 194K (mutual funds)
- 30%-slab investors now pay more on dividends
Dividends declared and paid up to 31 March 2020 remain tax-free in the shareholder's hands — DDT was already borne by the company. Only dividends received on or after 1 April 2020 are taxable at slab. No DDT credit is available for post-April-2020 dividends.
Dividends across shares, MFs and foreign stocks? Get your ITR done right.
Get ITR Filing Help →TDS on Dividend & How to Avoid It (15G/15H)
A company or AMC must deduct TDS before paying dividend once the year's dividend crosses the threshold. The TDS is not an extra tax — it is credited against your final liability and you claim it in the ITR from your Form 26AS / AIS.
| Payer | TDS section | Rate | Threshold | No PAN |
|---|---|---|---|---|
| Company (equity shares) | Section 194 | 10% | Rs 10,000/year | 20% |
| Mutual fund (IDCW) | Section 194K | 10% | Rs 5,000/year | 20% |
| REIT / InvIT (interest part) | Section 194LBA | 10% | No threshold | — |
Non-resident dividends are covered by Section 195 (usually 20% + surcharge/cess, subject to DTAA), not 194/194K.
If your total taxable income is below the basic exemption limit, you can stop this upfront TDS by filing a self-declaration with each payer at the start of the year:
- Form 15G — resident below 60 whose total income is below the taxable limit
- Form 15H — resident senior citizen (60+) whose tax on total income is nil
- File it separately with each company / AMC, before the dividend is paid
Forms 15G/15H only prevent the 10% deduction at source — they do not exempt the dividend. If you file them wrongly (when your income is actually taxable), the tax is still due and interest may apply. And unlike interest income, you cannot claim any expense against dividend except interest on money borrowed to invest — capped at 20% of the dividend under Section 57.
How to Report Dividend Income in Your ITR
- AIS / Form 26AS downloaded
- Broker & AMC dividend statements
- Gross dividend entered in Schedule OS
- TDS (194 / 194K) claimed in Schedule TDS
- Interest-on-loan deduction (max 20%) noted
- Foreign dividend + DTAA / Form 67 (if any)
- Correct ITR form (ITR-1 or ITR-2) chosen
- Advance tax paid on estimated dividend
Because dividends are taxable at slab, they attract advance tax. To avoid Section 234C interest, advance tax on dividend is required only after the dividend is declared or paid — but you must then include it in the next instalment. Large dividends can push you into a higher slab, so estimate carefully.
Want us to capture every dividend and TDS credit and file your return?
Get ITR Filing Help →Dividend Tax — Frequently Asked Questions
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Our CA-led team pulls your AIS, reconciles every dividend and 194/194K TDS credit, claims eligible interest, handles foreign dividends and DTAA, and files an accurate ITR — 100% online, across India.