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Dividend Tax 2025-26 — TDS on Dividend, Section 194 & DDT Abolition

Updated: 3 June 2026  |  Section 194 & 194K  |  Budget 2020 DDT Abolition  |  Income-tax Act, 2025

Dividends from Indian companies are taxable in the hands of shareholders at their applicable slab rate since Budget 2020 (DDT — Dividend Distribution Tax — was abolished from April 1, 2020). Companies must deduct TDS at 10% under Section 194 if dividend exceeds ₹10,000 per shareholder per year. Mutual fund dividends (IDCW payouts): taxable at slab rate + 10% TDS under Section 194K if dividend > ₹5,000. Foreign company dividends: taxed at 20% under Section 115A. Dividend income is reported as Income from Other Sources in ITR.
10% TDS
10% TDS on dividend above ₹10,000 — Section 194.
Dividend taxable at slab rate (DDT abolished April 2020). Submit Form 15G/15H to avoid TDS if income below taxable limit.

Dividend Taxation — All Types (FY 2025-26)

Dividend SourceTaxable InTax RateTDS SectionTDS Rate & Threshold
Indian listed companyShareholder (slab rate)Slab rateSection 19410% if dividend > ₹10,000/year
Mutual Fund (IDCW payout)Investor (slab rate)Slab rateSection 194K10% if dividend > ₹5,000/year
Foreign company dividendRecipient (flat rate)20% (Section 115A) or slabTDS in source countryDTAA relief may apply
REIT / InvIT distributionsUnitholderDepends on component (interest/dividend/capital return)Section 194LBA10% on interest component
Co-operative society / deemed dividendRecipientSlab rate (Section 2(22)(e))Section 19410% on deemed dividend

DDT Abolition — Before and After April 2020

The Dividend Distribution Tax (DDT) system was abolished by Budget 2020, fundamentally changing how dividends are taxed in India.

AspectBefore April 1, 2020 (DDT Era)From April 1, 2020 (Post-DDT)
Who pays the tax?Company pays DDT before distributingShareholder pays tax in ITR at slab rate
Tax rate on companyDDT @ 15% + surcharge + cess (~20.56% effective)Nil (company has no DDT obligation)
Shareholder's taxDividend tax-free in hands of shareholder (up to ₹10L; 10% above)Fully taxable at slab rate
TDS on dividendNo TDS (DDT already paid)10% TDS (Section 194) if > ₹10,000
Mutual Fund IDCWMF paid DDT; investor got tax-free dividendInvestor pays tax at slab; 10% TDS (194K)
Benefit for high-income investorsDDT was cheaper than high slab rate for 30% bracket30% slab taxpayers now pay more tax on dividends

Dividends received up to March 31, 2020 remain tax-free in shareholders' hands (DDT was already paid). Only dividends declared/paid on or after April 1, 2020 are taxable at slab rate.

Frequently Asked Questions

Is dividend income taxable in India for FY 2025-26?
Yes. Dividends from Indian companies are fully taxable in the hands of shareholders at their applicable slab rate for FY 2025-26. This has been the case since Budget 2020 (effective from April 1, 2020), when the Dividend Distribution Tax (DDT) system was abolished. Under DDT, companies paid a flat 15% tax before distributing dividends and shareholders received tax-free dividends. Now, shareholders must include dividend income under "Income from Other Sources" and pay tax at their slab rate. No DDT credit is available for dividends received on or after April 1, 2020.
What is the TDS rate on dividend from mutual funds?
TDS on dividend (IDCW payout) from mutual funds is deducted under Section 194K at 10% if the total dividend paid to a single investor exceeds ₹5,000 in a financial year. This is different from TDS on dividends from company shares (Section 194, threshold ₹10,000). The TDS under 194K is applicable from April 1, 2020, when DDT on mutual funds was abolished. The dividend amount is taxable at the investor's slab rate. TDS can be claimed as credit while filing ITR. Submit Form 15G/15H (for eligible taxpayers) to the AMC to avoid TDS deduction if your total income is below the taxable limit.
How to show dividend income in ITR?
Dividend income must be reported under Schedule OS (Income from Other Sources) in your ITR. Step 1: Collect Form 26AS / AIS to see total dividends received and TDS deducted. Step 2: Report the gross dividend amount (before TDS) in Schedule OS. Step 3: Claim TDS as credit in Schedule TDS. Step 4: If dividend from a single company/MF exceeds ₹10,000, claim expenses related to earning that dividend (like interest on loan taken to buy shares — allowed as deduction up to 20% of dividend income). Resident individuals use ITR-1 or ITR-2 (if no business income); ITR-2 if capital gains also present.
What is the tax rate on dividend from a foreign company?
Dividend from a foreign company received by an Indian resident individual is taxable under Section 115A at 20% (plus surcharge and 4% cess) — this is the flat rate. Alternatively, if the taxpayer opts for the regular slab system, the dividend is taxed at slab rate. Section 115A rate (20%) is generally chosen only if slab rate is higher. The 20% rate is on gross dividend without any deduction. If TDS has been deducted in the foreign country, Double Tax Avoidance Agreement (DTAA) relief may be available. Report under Schedule OS in ITR.
Can I avoid TDS on dividend with Form 15G or 15H?
Yes. If your total income (including dividend) is below the basic exemption limit (₹3L for individuals below 60, ₹3L for senior citizens under new regime), you can submit Form 15G (age below 60) or Form 15H (age 60+) to the company or mutual fund to request zero TDS deduction on dividend. Conditions: (1) Your estimated total income for the year must be below the taxable limit; (2) Total dividend + other income should not make you taxable. Form 15G is a self-declaration. You must submit it at the beginning of each financial year for each dividend-paying company or AMC separately. This does not exempt you from paying tax — just prevents upfront TDS.

Related Pages

Mutual Fund Tax LTCG Tax Income from Other Sources TDS Rate Chart File ITR
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