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TDS on Dividend – Sec 194

U.C Date : 25 Feb 2015

The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India is liable to deduct tax at source on dividends.

Tax is to be deducted at the time of credit of such amount to account of payee or at the time of payment whichever is earlier.

Tax is to be deducted at the rate of 10%. If the recipient of income doesn’t furnish his PAN to deductor then TDS is to be deducted @ 20%.

Assessee can apply to assessing officer for no TDS or TDS at lower rate under Section 197.

TDS is not required to be deducted if

  1. Dividend covered by sec 115-O
  2. Declaration is made in form 15G or 15H
  3. Amount of dividend paid or is likely to paid in a financial year to a shareholder doesn’t exceed Rs. 2,500 and such amount is paid by account payee cheque.
  4. Any dividend payable to LIC, GIC or its subsidiaries or any other insurer in respect of shares owned by them or in which they have full beneficial interest

Also Read:

Bare Act for Sec 194

Bare Act for Sec 194

The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment in cash or before issuing any cheque or warrant in respect of any dividend or before making any distribution or payment to a shareholder,  [who is resident in India,] of any dividend within the meaning of sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2, deduct from the amount of such dividend, income-tax  at the rates in force :

[Provided that no such deduction shall be made in the case of a shareholder, being an individual, if—

(a)  the dividend is paid by the company by an account payee cheque; and

(b)  the amount of such dividend or, as the case may be, 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  [two thousand five hundred] rupees:

Provided further that the provisions of this section shall not apply to such income credited or paid to—

(a)  the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), in respect of any shares owned by it or in which it has full beneficial interest;

(b)  the General Insurance Corporation of India (hereafter in this proviso referred to as the Corporation) or to any of the four companies (hereafter in this proviso referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any shares owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest;

(c)  any other insurer in respect of any shares owned by it or in which it has full beneficial interest :] [Provided also that no such deduction shall be made in respect of any dividends referred to in section 115-O.]

3 comments

  1. Worthy reading. Thank you!

  2. Dear sir,My Client is Individual Tax Payer, He has paid tds on property, demand raised because of late payment, SO,i Downloaded Justification report, so, what is the password to extract ZIP file for Individual Justification report(26QB).zip file name is ‘JR_26QB_AC8465240’

    Regards,
    Vijay.

    • Rohit Pithisaria

      The password for opening justification report is ‘JR__

      __‘, e.g., JR_AAAAA1235A_24Q_Q3_2010-11.

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