How is dividend income taxed in India?
Since FY 2020-21, dividends are taxable in the hands of the shareholder at their normal slab rate (the dividend distribution tax was abolished). The company deducts 10% TDS under Section 194 if your total dividend from it exceeds ₹5,000 in a year (no PAN: 20%). You report dividends under 'income from other sources' in your ITR.
1How it's taxed
Dividends from Indian companies and mutual funds are added to your total income and taxed at your slab rate. There's no separate concessional rate and no exemption threshold (other than the TDS trigger).
2TDS and deductions
10% TDS applies if dividends from a company exceed ₹5,000 a year. You can claim that TDS as credit when filing. Interest on money borrowed to invest is deductible up to 20% of the dividend income.
Frequently asked questions
Is dividend income tax-free in India?
No — since FY 2020-21 dividends are fully taxable at your slab rate. The earlier exemption (up to ₹10 lakh) and dividend distribution tax were removed; now the shareholder pays tax directly.
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General information for AY 2026-27, not professional advice. Laws change with each Finance Act, notification or amendment and depend on your specific facts — verify the current position with a licensed CA or advocate before acting.