Compute tax liability on dividend income from equity stocks and mutual funds at marginal slab rates, with 10% Section 194 TDS and Section 57 interest deductions.
Section 57 cap: Max 20% of dividend income.
Total tax on dividend at 31.2% effective rate is ₹40,560.
With the abolition of the Dividend Distribution Tax (DDT) by the Finance Act 2020, dividend income from domestic companies and mutual funds is fully taxable in the hands of the recipient shareholders at their applicable slab rates under "Income from Other Sources".
Indian companies and mutual fund AMCs must deduct 10% TDS under Section 194 (or Section 194K) if the aggregate dividend paid to a resident individual shareholder exceeds ₹5,000 in a financial year. If PAN is not provided, TDS is deducted at 20% under Section 206AA.
Shareholders whose total estimated annual income is below the basic exemption limit can submit Form 15G (below 60 years) or Form 15H (senior citizens 60+ years) to the company's Registrar and Transfer Agent (RTA) to prevent 10% TDS deduction.
| Parameter | Statutory Provision |
|---|---|
| Tax Head & Section | Income from Other Sources (Section 56(2)(i)) |
| Tax Rate | Applicable Individual Slab Rates (New or Old Regime) |
| Deduction for Expenses (Sec 57) | Interest expense ONLY, capped at exactly 20% of gross dividend |
| TDS Rate (Section 194 / 194K) | 10% for resident individuals exceeding ₹5,000 / FY |
| NRI Shareholder TDS (Section 195) | 20% (+ Surcharge/Cess) or lower DTAA Treaty Rate |
No. Under Section 57(1), no deduction is allowed for management commission, collection charges, advisory fees, or demat charges. Only interest expense incurred for purchasing shares is deductible (up to 20%).
Yes. Dividends received by a resident Indian from foreign companies (e.g. Apple, Google, Tesla) are fully taxable at Indian slab rates, with Foreign Tax Credit (FTC) available under Section 90/91 via Form 67.
Since dividend declarations cannot be accurately predicted in advance, no Section 234C interest penalty is charged if the taxpayer pays advance tax in subsequent remaining installments after the dividend is declared or received.