TDS ON DIVIDENDS SECTION 194
Who is responsible to deduct tax
The principal officer of a domestic company paying dividend u/s 2(22) to any resident shareholder.
Note: In the following cases, tax is not required to be deducted:
A. No deduction shall be made if dividend is paid to an insurance company
B. No deduction shall be made in the case of a shareholder, being an individual, if:
i. the dividend is paid by the company by any mode other than cash; and
ii. the amount of such dividend or the aggregate of the amounts of such dividend distributed or paid or likely to be distributed or paid during the financial year by the company to the shareholder, does not exceed Rs. 5,000:
Summary
| Particular | Rate of TDS | Remarks |
| Resident Shareholders | 10% (presently reduced to 7.5% until 31st March 2021) if dividend amount exceeds INR 5,000 20% in absence of PAN | ♦ No TDS if Form 15G/15H submitted ♦ No TDS for specified Insurance companies/Mutual Funds and AIF |
| Non-Resident Shareholders (Other than FPI) | 20% plus applicable surcharge and cess or rates as per DTAA whichever is beneficial | ♦ Surcharge restricted to maximum 15% ♦ TRC to be obtained with declaration for PPT, beneficial ownership, No PE/POEM in India |
| FPI | 20% plus applicable surcharge and cess | |
| Compliance Requirements | ♦Filing TDS Return and Issuing TDS Certificates ♦ Form 15CA in case of all payment to Non-Residents ♦ CA Certificate in Form 15CB in case payment to Non-Residents exceeds INR 5 Lakhs |
When tax shall be deducted: At the time of payment
Rate of TDS: 10% (No surcharge, health and education cess) on dividend considered u/s 2(22) [From 14-05-2020 to 31-03-2021: 7.5%]
Exemption or relaxation from the provision:
• When the recipient applies to the Assessing Officer in Form No. 13 and gets a certificate authorizing the payer to deduct tax at lower rate or deduct no tax
• When a declaration in Form 15G (in duplicate) is furnished by the assessee to the payer.