# Tax on Dividend Income

> Dividends are taxed in your hands at your slab rate under 'Income from other sources'. Companies and mutual funds deduct 10% TDS for residents when dividends from that payer exceed ₹10,000 in a year (the threshold was raised from ₹5,000 from April 2025). The only deduction allowed is interest on money borrowed to invest, capped at 20% of the dividend.

Interactive calculator: https://www.industax.com/calculators/dividend-tax

- **Taxed at:** Your slab rate
- **TDS (residents):** 10% above ₹10,000
- **Interest deduction cap:** 20% of dividend

## How dividends are taxed

| Item | Rule |
| --- | --- |
| Tax rate | Slab rate of the shareholder |
| TDS — residents | 10% if dividend from a payer exceeds ₹10,000 in the year |
| TDS — no PAN | 20% |
| TDS — NRIs | 20% plus surcharge and cess, or lower treaty rate with TRC and Form 41 (formerly 10F) |
| Deduction | Only interest on borrowed funds, up to 20% of the dividend |
| Advance tax | Dividends count; interest under 234C isn't charged on the shortfall caused by dividends received later |

## Avoiding TDS on small dividends

If your total income is below the taxable limit, you can submit Form 15G (or 15H if you're 60 or older) to the company or its registrar so that TDS isn't deducted. Under the new Act these declarations continue with renumbered forms; registrars publish the current format each year.

## Worked example: investor in the 30% slab

1. Dividends received in the year: ₹80,000 from several companies.
2. Tax at 30% = ₹24,000, plus 4% cess = ₹960.
3. TDS of 10% was deducted on dividends from payers above ₹10,000 — say ₹7,000 in total.

**Result:** Tax payable at filing ≈ ₹24,960 − ₹7,000 TDS = ₹17,960.

## FAQs

### Are dividends tax-free up to ₹10,000?

No. ₹10,000 is only the TDS threshold per payer. All dividends are taxable at your slab rate, even if no TDS was deducted.

### How are dividends taxed for NRIs?

At 20% plus surcharge and cess under the Act, or the lower rate in the tax treaty with their country of residence (often 10–15%) if they give the company a tax residency certificate and Form 41 (formerly 10F).

### Are mutual fund IDCW payouts taxed the same way?

Yes. Income Distribution cum Capital Withdrawal (IDCW) payouts from mutual funds are taxed like dividends — at slab rates, with TDS above ₹10,000 a year.

## Official sources

- incometaxindia.gov.in: https://www.incometaxindia.gov.in/

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Canonical page: https://www.industax.com/calculators/dividend-tax
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This is general information, not advice for your specific facts.