TDS on Dividends [Section 194] | AY 2019-20 onwards

Applicability of TDS under section 194

Dividends declared, distributed or paid by a domestic company attracts dividend distribution tax in the hands of the company. Such dividend includes deemed dividend under sections 2(22)(a) to (d). Hence, no tax is deductible at source in respect of such dividend.

Accordingly, TDS provisions under this section are attracted only in respect of deemed dividend referred to in section 2(22)(e) to a shareholder who is resident in India, if such dividend exceeds Rs 2,500/- in a year.

Rate of TDS on Dividends

The rate of deduction of tax in respect of such dividend is 10%.

Non-applicability of TDS under section 194

Individual shareholders, who are residents in India are entiltled to receive their dividends from any domestic company without deduction of tax at source by the company in cases where -

• dividend income received from the company does not exceed Rs 2,500/- during the year; and
• the dividend is paid by an account payee cheque.

The TDS provisions will not apply to dividend receivable by LIC, GIC, its subsidiaries or any other insurer provided the shares are owned by them, or they have full beneficial interest in such shares.