Tax Deduction at Source on Dividend Payments: Exploring the Provisions of Section 194 of Income Tax Act
Sec 194 of Income Tax Act
Section 194 allows principal officer of an Indian Compnay or any company who has made arrangements for declaration and payment of dividend (including dividend on preference shares) to resident shareholders to deduct TDS.
limit of Sec 194
Under this section no TDS is deducted upto Rs. 5000 (of the dividend amount), if dividend is paid in any mode other than cash.
Rate of TDS
Tax to be deducted @ 10% for resident individuals,Hindu Undivided Family(HUF) and firms.
Tax has to be deducted at 20% for non-residents.
If the receipient of dividend do not furnish his PAN to the deductor company then TDS has to be deducted at 20%.
Form 15H and 15G
| Particulars | Rate of TDS | Remarks |
| Resident Shareholders | 10% of dividend amount if it exceeds Rs. 5000. | No TDS if 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 lower. | Surcharge is restricted to maximum if 15%. |
| FPI | 20% plus applicable surcharge and cess |
