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  • Category: Stock Market

    How much of dividend income is tax free?

    Are you having a query about whether dividend earned from stocks is tax free or not? Looking out for detailed norms regarding the taxation rules about such income? Our ISC experts shall provide your with correct advice regarding the tax on the income accrued.

    I have bought some good dividend yield stocks. Some of them are Coal India, Hindustan Zinc, IOC etc. I receive a certain amount of money as dividends from these shares. I would like to know, how much of income received from these shares as dividends is tax free? Is it counted as capital gains?
  • Answers

    2 Answers found.
  • The Dividend from an Indian company is exempted from tax. There is a change in this from the 2016 budget. As per this new rule, a resident individual/HUF/Firm has to pay tax on the dividend he has received at the rate of 10% of the amount if the total dividend received from a domestic company during the year is more than Rs 10,00.000/- as per the section 115 BBDA. The tax is applicable only to the amount exceeding ten lakhs. For example, if you received eleven lakhs as a dividend from a company, you have to pay IT for the extra one lakh at the rate of 10%.

    Dividend received from a foreign company is taxable. It will be charged to tax under the head "income from other sources." It is treated as any other taxable income and the rate of tax will be based on the income slab either 5%b or 10% or 20% or 30%.
    The dividend obtained from foreign countries will attract taxation in both countries. If it is paid in both the countries, the person can apply for double taxation relief. The exemption can be claimed under the double taxation avoidance agreement agreed between the two countries, if it is existing. Otherwise, the claim can be applied under section 91 of IT act. This will help you in avoiding the tax twice.
    If you require further details you can contact a good tax consultant in your area.

    always confident

  • As per the present rules and regulations in this regard, the dividend received on the shares of companies is tax-free and the taxpayer has only to show it in their income tax return for record purposes where it will be reflected as tax-free income.

    The dividend is not a capital gain. It is distributed to the shareholders from the profit generated by a company.

    The capital gain comes in picture only when you sell the shares in the market and realize some gain on it. Capital gain is treated in a different manner and will be shown in your income tax return pertaining to that particular year in which you sell them. You need not consider that till you sell those shares.

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