Home BusinessHappy About Getting Dividends From Shares, Mutual Funds? Do This To Avoid TDS On That Passive Income During FY23-24
Tax is deducted from the dividend income if the total dividend received during a financial year exceeds Rs 5,000, as per the income tax laws.
Happy About Getting Dividends From Shares, Mutual Funds? Do This To Avoid TDS On That Passive Income During FY23-24 (Image: Pixabay)
New Delhi: Most investors become happy when they receive dividend from equity shares or any mutual fund scheme (equity or non-equity). However, the dividends received so are taxable by law. The income tax law of taxing dividends came into effect on April 1, 2020 (FY 2020-21). Earlier, the dividends were tax-free in the hands of investors.Also Read: LIVE Updates | KKR Vs SRH, IPL 2023 Score: Brook, Agarwal Give Hyderabad Perfect StartJNU Recruitment Exam Date For Non-Teaching Posts Out at recruitment.nta.nic.in, Check Details HereLucknow Vs Punjab Dream11 Team Prediction, IPL 2023, Match 21: Top Picks, Captain, Playing 11s For Today’s Match, Ekana Stadium, 7.30 PM IST April 15, Saturday TDS was also introduced as dividends became taxable in the hands of individuals. Tax is deducted from the dividend income if the total dividend received during a financial year exceeds Rs 5,000, as per the income tax laws. The TDS rate for dividend income is 10 per cent. It’s 20 per cent if PAN is not available with the institution at the time of making dividend payment.
For example, suppose an individual is holding 1,000 shares of company A. The company declares a dividend of Rs 7 per share. An individual is eligible to receive dividends of Rs 7,000 (Rs 7 X 1,000). As the amount of dividend exceeds Rs 5,000, TDS will be applicable to it. The TDS of Rs 700 (10 per cent of Rs 7,000) will be deducted from the dividend amount and the balance Rs 6,300 will be deposited to the individual’s bank account.
However, in certain cases, individuals might not have taxable income in a particular year or are not required to pay any taxes on the income earned due to tax rebate available under Section 87A. What Can They Do To Avoid TDS On the Dividend Income?Submit Form 15G/H to avoid TDS on dividend income: As per the income tax law, an individual is allowed to submit Form 15G or Form 15H (as applicable) to the financial institution concerned to avoid TDS on the income earned. However, there are eligibility requirements to submit Form 15G/15H. Who can submit Form 15G/15H? An individual aged below 60 years can submit Form 15G whereas senior citizens aged above 60 can submit Form 15H. However, there are certain conditions that must be satisfied for individuals and senior citizens to submit F15G/H.
“An individual or senior citizen can submit Form 15G/Form 15H to avoid TDS on the dividend income earned. The forms can be submitted if there is no tax payable on estimated total income in a particular financial year. Only resident individuals can submit Form 15G/Form 15H to avoid TDS. NRIs are not allowed to submit the forms,” Chartered Accountant Naveen Wadhwa, DGM at Taxmann.com, told ET. Conditions to be satisfied to submit Form 15G: He/she should be a resident individual.Age of individual must be below 60 years.The total dividend income from all mutual fund schemes and equity shares must be less than the basic exemption limit.The estimated tax liability for a particular financial year is nil.Conditions to be satisfied to submit Form 15H: Age of individual must be 60 years or above.Senior citizen must be a resident individual.Estimated tax payable on total income for the relevant financial year should be nil.
An individual can file declaration in Form 15G if his/her relevant income, with respect to which he/she is eligible to file a declaration, does not exceed the maximum exemption limit and tax his/her estimated total income for the financial year in which such income to be included is nil. An individual can file declaration under Form 15H if his/her estimated total income, after considering the rebate under Section 87A, for the financial year in which such income to be included in nil. Through Section 87A, individuals having taxable income of Rs 5 lakh in the old tax regime and Rs 7 lakh in the new tax regime, can use tax rebate. With this tax rebate, their final tax payable amount comes to zero.
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Published Date: April 14, 2023 7:38 PM IST
https://www.india.com/business/happy-dividends-shares-mutual-funds-avoid-tds-passive-income-fy23-24-5996723/
