Dividend tax refers to the tax imposed on the income earned from dividends in India. For the Assessment Year (AY) 2024-25, there are certain key aspects to consider regarding dividend taxation in the country.
1. Dividend Distribution Tax (DDT)
Prior to the financial year 2020-21, companies were required to pay Dividend Distribution Tax (DDT) on the dividends declared and distributed to shareholders. However, with the introduction of the Finance Act 2020, DDT was abolished. This means that companies are no longer liable to pay DDT.
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2. Taxation of Dividend Income for Individuals
Individuals receiving dividend income are now required to pay tax on such income as per their applicable income tax slab rates. Dividends received from domestic companies are considered as taxable income under the head “Income from Other Sources.”
3. Applicable Tax Rates
As per Section 194, TDS shall be applicable to dividends distributed, declared, or paid on or after 01-04-2020; an Indian company shall deduct tax at the rate of 10% from dividend distributed to the resident shareholders if the aggregate amount of dividend distributed or paid during the financial year to a shareholder exceeds Rs. 5,000.
The tax rates applicable to dividend income depend on the total income earned by the individual. As per the current tax structure, individuals can fall under different income tax slabs, ranging from 0% to 30%. The applicable tax rate on dividend income will be based on the individual’s total income and the respective slab rate.
Individuals earning dividend income are required to include it in their income tax return and pay the applicable tax accordingly.
It is advisable to consult with a tax professional or refer to the latest guidelines from the Income Tax Department to ensure accurate compliance with dividend tax regulations for AY 2024-25 in India.
