Tax on Dividend Income —
Taxed at Your Slab Rate
How dividend from Indian shares, mutual-fund IDCW and foreign stocks is taxed in your hands, the 10% TDS under Section 194, the new Rs 10,000 threshold and the Section 57 interest deduction.
Dividend is taxed in your hands at your income-tax slab rate under "Income from Other Sources" — from FY 2020-21 the company no longer pays Dividend Distribution Tax (DDT). The payer deducts TDS at 10% under Section 194 once your dividend from that company (or AMC) crosses Rs 10,000 in a year (raised from Rs 5,000 by Budget 2025, effective 1 April 2025). You may deduct interest on money borrowed to buy the shares, but only up to 20% of the dividend under Section 57, and only in the old regime.
Until FY 2019-20, companies paid roughly 15% Dividend Distribution Tax and dividend up to Rs 10 lakh was tax-free for most investors. Since FY 2020-21, DDT is gone and dividend is fully taxable in the shareholder's hands at the applicable slab rate — so high-slab investors now pay more, and low-slab investors pay less.
Dividend Tax & TDS by Source
How each type of dividend is taxed, the TDS section and rate, and the threshold below which no TDS is cut. Report all of it under Income from Other Sources in your return.
| Dividend source | Tax in your hands | TDS rate | Threshold |
|---|---|---|---|
| Indian company shares | Slab rate | 10% (Sec 194) | Rs 10,000/yr per company |
| Mutual fund IDCW | Slab rate | 10% (Sec 194K) | Rs 10,000/yr per AMC |
| REIT / InvIT (dividend part) | Slab rate | 10% (Sec 194LBA) | All amounts |
| Foreign company shares | Slab rate | No Indian TDS* | Foreign WHT — claim FTC |
| NRI — Indian dividend | Slab / 20% | 20% (Sec 195) | All amounts (DTAA may reduce) |
| PAN not furnished | Slab rate | 20% (Sec 206AA) | Higher-rate TDS |
* Foreign dividend suffers withholding tax abroad; claim Foreign Tax Credit via Form 67. Thresholds are per payer, per financial year.
TDS on Dividend — the Rs 10,000 Threshold
Under Section 194, an Indian company deducts 10% TDS before paying dividend, but only once your total dividend from that company crosses the annual threshold. Budget 2025 raised this threshold from Rs 5,000 to Rs 10,000 per company (and per AMC for IDCW) with effect from 1 April 2025, so more small investors now receive dividend without any TDS.
- 10% TDS once dividend from one company/AMC exceeds Rs 10,000 in the year
- 20% TDS if you have not furnished a valid PAN (Section 206AA)
- Form 15G (below 60, income below the exemption limit) or Form 15H (senior citizens with nil tax) stops TDS at source
- TDS is only a pre-payment — final tax is at your slab rate, and any excess TDS is refunded when you file your ITR
The 10% deducted is not the tax you owe. If you are in the 30% slab you must pay the balance; if you are in the 0-5% slab the extra TDS comes back as a refund. Always reconcile dividend TDS with your AIS / Form 26AS before filing, because companies report every payout.
Dividend TDS showing in your 26AS? Get your return filed and refund claimed.
Get ITR Filing Help →IDCW vs Growth, and Foreign Dividend
Mutual-fund dividend is now called IDCW (Income Distribution cum Capital Withdrawal) and is fully taxable at your slab rate. For most investors the Growth option is more tax-efficient, because gains are taxed as capital gains (often lower) instead of slab-rate dividend.
Growth option — capital gains
- Equity LTCG (held >12m) taxed at 12.5% above Rs 1.25L
- Equity STCG taxed at 20%
- You control when to realise gains
- Best for 20-30% slab investors
IDCW option — slab rate
- Every payout taxed at your full slab rate
- 10% TDS above Rs 10,000/yr per AMC
- No control over payout timing
- Only near-neutral for 0-5% slab investors
See tax on mutual funds and Section 112A LTCG for the capital-gains side of the growth option.
Tax on Foreign Dividend
Dividend from foreign companies (for example US stocks) is added to your total income and taxed at your slab rate. The foreign country usually deducts withholding tax — US WHT is 25%, reduced to 15% if you file a W-8BEN claiming the India-US treaty. You then claim a Foreign Tax Credit for that tax under the DTAA by filing Form 67 before your ITR.
Rs 10,000 US dividend · 30% slab · 15% WHT
Rs 1,00,000 Indian dividend · loan interest Rs 30,000
You can deduct interest on money borrowed to buy the shares, but never more than 20% of the dividend, and no other expense (brokerage, advisory, demat charges) is allowed. This deduction is disallowed in the default new tax regime — it survives only if you opt for the old regime.
How to Report Dividend in Your ITR
- AIS / Form 26AS downloaded
- Company dividend statements / contract notes
- Mutual-fund IDCW statements per AMC
- Foreign dividend & withholding-tax proof
- Form 67 filed for Foreign Tax Credit
- Loan-interest certificate (Sec 57, old regime)
- Advance tax paid if TDS falls short
- Dividend entered in Schedule OS
Because TDS is only 10% but your slab may be higher, a big dividend can create an advance-tax liability. Since FY 2021-22 the law relaxes interest under Sections 234C for dividend that could not be estimated — but pay advance tax in the quarter you actually receive the dividend to stay safe.
Want your dividend, capital gains and TDS reconciled and filed correctly?
Get ITR Filing Help →Tax on Dividend — Frequently Asked Questions
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