Income Tax on Dividends — Slab Rate + 10% TDS

No, not anymore. The old rule where dividends were exempt in your hands up to Rs10 lakh (with 10% extra tax above that under Section 115BBDA) applied only up to AY 2020-21 under the DDT regime. From AY 2021-22 there is no exemption limit — every rupee of dividend is taxable at your slab rate. The Rs10,000 figure today is only the TDS threshold, not an exemption.

Possibly not. Under the new default regime for AY 2026-27, the Section 87A rebate makes tax nil up to Rs12,00,000 of total income (about Rs12.75 lakh for salaried after the Rs75,000 standard deduction). If your total income including dividends stays within that, your net tax is nil — but if TDS was deducted you must still file an ITR to claim the refund.

Dividend income is reported under Income from Other Sources. It cannot be set off against business losses or capital losses and must be computed separately, then added to total income. Because you have dividend income you generally file ITR-2 (or ITR-3 if you also have business/professional income), not the simple ITR-1.

Yes, if your total tax liability exceeds Rs10,000 for the year. However, because dividends cannot be predicted, Section 234C interest relief applies — you pay advance tax on the dividend in the quarter you actually receive it, rather than being penalised for earlier instalments. TDS already deducted reduces the advance tax you owe.

TDS on dividends from Indian companies is 10% under Section 194, deducted only if the total dividend paid by one company to you in a financial year exceeds Rs10,000. This threshold was raised from Rs5,000 to Rs10,000 with effect from 1 April 2025 (FY 2025-26). The TDS is deducted before the dividend is credited and appears in your Form 26AS and AIS.

For FY 2025-26 (AY 2026-27) onwards it is Rs10,000. The Finance Act 2025 doubled the Section 194 and Section 194K no-TDS threshold from Rs5,000 to Rs10,000 with effect from 1 April 2025. For years up to FY 2024-25 the threshold was Rs5,000. The limit is per company (or per AMC), not a combined figure across all your holdings.

Mutual-fund dividend, now called IDCW (Income Distribution cum Capital Withdrawal), attracts 10% TDS under Section 194K if the total IDCW from one AMC exceeds Rs10,000 in the financial year. The AMC deducts it before crediting the payout. Note this applies only to the IDCW payout — capital gains on redeeming units are taxed separately under the capital-gains rules.

If your total income is below the basic exemption limit, submit Form 15G (for individuals/HUF) or Form 15H (for senior citizens) to the company or AMC so they do not deduct the 10% TDS. Companies, firms and taxpayers above the limit cannot use these forms and must instead apply to the Assessing Officer for a lower or nil deduction certificate under Section 197.

Yes. TDS deducted under Section 194/194K is only a prepayment of your tax. When you file your ITR, it is set off against your actual tax liability computed on total income. If the TDS is more than your final liability — common for small investors in the nil-tax bracket — the excess is refunded after your return is processed.

Only one: interest on money borrowed to invest in the shares or mutual-fund units, and even that is capped at 20% of the gross dividend under Section 57(i). For example, on Rs1,00,000 of dividend you can deduct at most Rs20,000 of interest, even if you paid more. No other expense — brokerage, STT, demat charges or cost of acquisition — is deductible from dividend income.

No. Brokerage, STT, demat and transaction charges are not deductible against dividend income, and the cost of acquisition of the shares is relevant only for capital gains, not dividends. The Finance Act 2020 deliberately limited dividend deductions to interest expense capped at 20% to prevent excessive erosion of the dividend tax base after DDT was removed.

Not directly. Chapter VI-A deductions such as 80C, 80D and 80G reduce your overall taxable income but cannot be claimed specifically against the dividend head. In practice they are also unavailable if you are on the new default regime, which does not allow most Chapter VI-A deductions in the first place.

They are taxed identically in your hands — both are added to total income and taxed at slab rates. The difference is administrative: stock dividends attract TDS under Section 194 (via the company/registrar), while mutual-fund IDCW attracts TDS under Section 194K (via the AMC). Both use the Rs10,000 threshold. Importantly, only the IDCW payout is dividend; growth-plan redemptions are capital gains.

Foreign dividends (for example from US stocks bought via LRS) are taxable in India — for a resident individual generally at slab rates. The source country usually withholds tax (the US withholds about 25%, reducible under the India-US DTAA). You can claim that as a Foreign Tax Credit under Section 90/91 by filing Form 67 before your ITR due date, so you are not taxed twice. Foreign holdings must be disclosed in Schedule FA of the ITR.

Dividends paid to non-residents attract TDS at 20% (plus surcharge and 4% cess) under Section 195, with no threshold. If the NRI is resident in a country with a Double Taxation Avoidance Agreement (DTAA) with India, a lower treaty rate (often 10-15%) can apply, provided the NRI furnishes a Tax Residency Certificate and Form 10F. The NRI then reports the dividend and TDS in an Indian ITR.

If dividends (and possibly capital gains or foreign income) are your only extra income beyond salary, you file ITR-2, because ITR-1 does not support capital gains or foreign-asset schedules well and salaried taxpayers with dividends usually have to move to ITR-2. If you also have business or professional income, use ITR-3. TaxClue can pick and file the correct form for you.