Table of Contents
1. Section 194 of the Income Tax Act, 1961
Section 194 of the Income Tax Act deals with TDS on dividend payment made by a domestic company.
2. What is the rate at which tax will be deducted under section 194?
- Tax is to be deducted at the rate of 10%.
- If the resident shareholder does not furnish his PAN, tax has to be deducted at the rate of 20%
3. When will TDS not be deducted under section 194?
No tax will be deducted if the shareholder is an individual provided the following conditions are satisfied
- The dividend is paid by any mode other than cash and
- The aggregate amount of such dividend received by the shareholder during the financial year not exceed Rs.5000
4. What are the cases in which TDS shall not be applicable?
Similarly, TDS under section 194 shall not apply
If any dividend
- is paid to LIC, GIC or its subsidiaries or to any other insurer in respect of the shares that are owned by them or in which they have a full beneficial interest.
- Is paid to a business trust by a special purpose vehicle referred to in section 10(23FC).
5. Whether TDS has to be deducted by the company on dividend paid to non-resident shareholder?
- TDS on dividend paid to a non-resident shareholder is not covered under this section.
- In such cases, tax is deducted as per the provisions of section 195 read with section 115A of the Income Tax Act, 1961.