TDS on Dividend Income — Section 194 & Section 194K Guide

Q: Can I submit Form 15G or 15H to avoid TDS on dividends?

Yes, resident individuals and HUFs can submit Form 15G (for persons below 60 years) or Form 15H (for senior citizens 60+) to the company or mutual fund to avoid TDS deduction. The declaration states that your total income for the year is below the basic exemption limit and therefore no tax is payable. For Form 15G, additional condition: the total interest/dividend income should not exceed the basic exemption limit. For Form 15H, only condition is that final tax on estimated income is nil. The form must be submitted at the beginning of the financial year (before dividend is paid). Note: Forms 15G/15H cannot be submitted without a valid PAN — if PAN is not furnished, TDS applies at 20% under Section 206AA regardless of income level.

Q: How does DTAA benefit apply on dividend TDS for NRI shareholders?

Non-resident shareholders can claim DTAA (Double Taxation Avoidance Agreement) benefit to reduce TDS on dividends. For example, India-USA DTAA caps dividend tax at 15%; India-UK DTAA at 15%; India-Mauritius at 5-15% depending on shareholding. The NRI must provide: (1) Tax Residency Certificate (TRC) from the country of residence; (2) Form 10F self-declaration; (3) PAN or foreign Tax Identification Number (TIN). Without these, domestic rate of 20% (Section 195) applies. After deduction at source, if the NRI believes excess TDS was deducted, they can file an ITR in India to claim refund. DTAA benefits must be claimed proactively before dividend payment — the company/mutual fund cannot apply DTAA rate without receiving proper documentation.

Q: How does dividend TDS affect my ITR filing?

Dividend income is fully taxable in your hands at your applicable income tax slab rate. When you receive dividend, the company/fund deducts 10% TDS. You must include the gross dividend (before TDS) as income in your ITR under the head "Income from Other Sources." The TDS deducted is reflected in your Form 26AS and AIS. In your ITR, you claim credit for the TDS against your total tax liability. If the TDS already paid exceeds your actual tax liability on dividend (e.g., you are in the 5% tax bracket), the excess becomes a refund. Always verify the TDS amount in Form 26AS matches the TDS certificates received from the company before filing. Discrepancies must be reported to the deductor for correction.

Updated: 3 June 2026 | Income Tax Act, 1961 | FY 2025-26 (AY 2026-27)

Section 194 requires Indian companies to deduct TDS at 10% on dividend exceeding ₹5,000 per financial year per shareholder. Section 194K applies 10% TDS on mutual fund dividend/income distributions above ₹5,000/year. Submit Form 15G/15H to avoid TDS if income is below exemption limit. NRI shareholders: TDS at 20% under Section 195 or DTAA rate (5–15%), whichever is lower. TDS credit is claimed via Form 26AS when filing ITR.

10% TDS

Dividend TDS threshold: ₹5,000 per company/fund per financial year
TDS kicks in only when total dividend from a single company or fund exceeds ₹5,000 in a year. Below ₹5,000 — no TDS deducted.

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Without valid PAN: TDS on dividend is deducted at 20% under Section 206AA, regardless of the actual amount. Ensure your PAN is registered with the company/depository (NSDL/CDSL) and with your mutual fund AMC to avoid excess TDS deduction.

Company Dividend vs Mutual Fund Dividend — TDS Comparison

Parameter	Company Dividend (Sec 194)	Mutual Fund Dividend (Sec 194K)
Section	194	194K
TDS rate (resident)	10%	10%
Threshold	₹5,000 per company per FY	₹5,000 per fund per FY
TDS not applicable to	LIC, GIC, similar insurers; 15G/15H submitted	Investor submits 15G/15H
NRI rate	20% (Sec 195) or DTAA rate	20% (Sec 196A) or DTAA rate
TDS deducted by	Company (registrar/RTA)	AMC / Fund house
Form 26AS / AIS	Appears as TDS u/s 194	Appears as TDS u/s 194K
ITR head	Income from Other Sources	Income from Other Sources
Form 15G/15H	Submit to company / RTA	Submit to AMC online/offline

DTAA Rates on Dividend for NRI Shareholders (Select Countries)

Country	DTAA Dividend Rate	Condition
USA	15%	Standard; 25% if shareholding < threshold
UK	15%	Standard rate
Singapore	10% / 15%	Depends on shareholding >25%
UAE	10%	Lower rate for UAE residents
Mauritius	5% / 15%	5% if holding >10% shares
Netherlands	10%	Standard rate
No DTAA / Domestic	20% + surcharge + cess	Section 195 domestic rate

Important: To claim DTAA rate, NRI must provide Tax Residency Certificate (TRC) and Form 10F before dividend payment date. Without these, 20% TDS (Section 195) applies. Excess TDS can be claimed as refund when filing India ITR. DTAA application must be made proactively.

Frequently Asked Questions

What is the TDS rate on dividend income from stocks?

Under Section 194, an Indian company must deduct TDS at 10% on dividend paid to a resident shareholder when the dividend exceeds ₹5,000 in a financial year from that company. The ₹5,000 threshold is per company, per financial year. If you hold shares in multiple companies, each company applies the ₹5,000 threshold separately. TDS is deducted at the time of payment or credit, whichever is earlier. The deducted TDS appears in your Form 26AS and AIS. You claim credit for this TDS while filing your ITR. For non-resident shareholders, Section 195 applies at 20% (plus surcharge and cess) or the applicable DTAA rate, whichever is lower.

Is TDS deducted on mutual fund dividend distributions?

Yes. Under Section 194K, mutual funds must deduct TDS at 10% on dividend (income distribution) paid to resident investors when the aggregate amount exceeds ₹5,000 per financial year. This was introduced from 1 April 2020 when the dividend distribution tax (DDT) payable by funds was abolished, making dividend income taxable in the hands of investors. For NRI investors, TDS on MF dividend is governed by Section 196A at 20% or DTAA rate. The TDS applies at payout, not at NAV level. Investors can submit Form 15G (age <60) or 15H (senior citizen) to the AMC if their total taxable income is below the basic exemption limit, to avoid TDS.

Can I submit Form 15G or 15H to avoid TDS on dividends?

Yes, resident individuals and HUFs can submit Form 15G (for persons below 60 years) or Form 15H (for senior citizens 60+) to the company or mutual fund to avoid TDS deduction. The declaration states that your total income for the year is below the basic exemption limit and therefore no tax is payable. For Form 15G, additional condition: the total interest/dividend income should not exceed the basic exemption limit. For Form 15H, only condition is that final tax on estimated income is nil. The form must be submitted at the beginning of the financial year (before dividend is paid). Note: Forms 15G/15H cannot be submitted without a valid PAN — if PAN is not furnished, TDS applies at 20% under Section 206AA regardless of income level.

How does DTAA benefit apply on dividend TDS for NRI shareholders?

Non-resident shareholders can claim DTAA (Double Taxation Avoidance Agreement) benefit to reduce TDS on dividends. For example, India-USA DTAA caps dividend tax at 15%; India-UK DTAA at 15%; India-Mauritius at 5-15% depending on shareholding. The NRI must provide: (1) Tax Residency Certificate (TRC) from the country of residence; (2) Form 10F self-declaration; (3) PAN or foreign Tax Identification Number (TIN). Without these, domestic rate of 20% (Section 195) applies. After deduction at source, if the NRI believes excess TDS was deducted, they can file an ITR in India to claim refund. DTAA benefits must be claimed proactively before dividend payment — the company/mutual fund cannot apply DTAA rate without receiving proper documentation.

How does dividend TDS affect my ITR filing?

Dividend income is fully taxable in your hands at your applicable income tax slab rate. When you receive dividend, the company/fund deducts 10% TDS. You must include the gross dividend (before TDS) as income in your ITR under the head "Income from Other Sources." The TDS deducted is reflected in your Form 26AS and AIS. In your ITR, you claim credit for the TDS against your total tax liability. If the TDS already paid exceeds your actual tax liability on dividend (e.g., you are in the 5% tax bracket), the excess becomes a refund. Always verify the TDS amount in Form 26AS matches the TDS certificates received from the company before filing. Discrepancies must be reported to the deductor for correction.

TDS Rate Chart 2025-26 TDS Return Filing Capital Gains Calculation NRI Taxation ITR Filing Section 206AA (No PAN TDS)

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