TDS on Dividends

DEDUCTION OF TAX ON DIVIDENDS AND SUBMISSION OF DOCUMENTS

As per the Finance Act 2020, the dividend income is taxable in the hands of the shareholders, and the Company is required to deduct tax at source from dividends paid to the shareholders at the prescribed rates. No tax will be deducted on dividend payments to the resident individual shareholders if the total dividend paid does not exceed ₹ 5,000 (Rupees Five Thousand only). The rate of tax deducted at source varies based on various factors such as the residential status of the shareholder, the status of linking of Aadhar with PAN, and documents registered with the Company.

The rules for the applicability of tax deducted at source can be accessed here for Resident Shareholders and here for Non-resident Shareholders.

Instructions for submission of tax documents are as follows.

1. The Company will issue a soft copy of the TDS certificate to its shareholders through e-mail registered with the Company/Company’s RTA post dividend payment. The shareholders can download the TDS certificate from the Income Tax Department’s website: https://incometaxindiaefiling.gov.in (refer to Form 26AS).
2. The necessary documents, such as Form No. 15G/15H, documents under section 196, 197A, FPI Registration Certificate, Tax Residency Certificate, Lower/Nil Tax deduction certificate, etc., can be submitted to the Company/Company’s RTA at [email protected] or can be uploaded on the link – https://liiplweb.linkintime.co.in/formsreg/submission-of-form-15g-15h.html as per the timeline intimated from time to time for each dividend declared by the Company to enable the Company to determine the appropriate TDS/withholding tax rate applicable.
3. All queries/grievances/issues in this regard shall be attended to/addressed at [email protected].
4. The application of the TDS rate is subject to necessary verification as per details as available in the Register of Members on the Record Date intimated from time to time for each dividend declared by the Company.
5. The Company shall verify all the documents submitted by the shareholders to assess the applicable rate of tax to be deducted by the Income Tax Act, 1961 provisions.
6. The beneficial Tax Treaty rates will not automatically apply at the time of tax deduction/withholding on dividend amounts. Application of beneficial Tax Treaty Rate shall depend upon the completeness and satisfactory review by the Company of the documents submitted by non-resident shareholders.
7. If there is ambiguity in law, interpretation, or matters concerning tax withholding, the highest applicable tax withholding rate shall be considered conservatively.
8. If documents are incomplete, the Company reserves the right not to consider the tax rate prescribed under the tax treaty.
9. If the tax on dividends is deducted at a higher rate in the absence of receipt of the aforementioned details/documents, the shareholders would have the option of claiming a refund of the excess tax deducted when filing the income tax return. No claim shall lie against the Company for such tax deduction.
10. The tax withholding rates referred to here are based on the law prevailing as of the date. This communication is not exhaustive and does not purport to be a complete analysis or listing of all potential tax consequences in the matter of dividend payment. The shareholders should consult their tax advisors for the requisite action to be taken by them.
11. In the event of any income tax demand (including interest, penalty, etc.) arising from any misrepresentation, inaccuracy, or omission of information provided by the shareholders, the shareholders shall only be responsible. The shareholders shall indemnify the Company and also provide the Company with all information/documents and cooperate in such proceedings.
12. Shareholders holding shares in multiple accounts under different statuses/categories and a single PAN may note that the higher tax applicable to the status in which shares are held under a PAN will be considered on their entire holding in different accounts.
13. SEBI vide its Master Circular no. SEBI/HO/MIRSD/POD-1/P/CIR/2024/37 dated May 7, 2024 has mandated that effective from April 1, 2024, the shareholder(s) who hold shares in physical mode and who have not updated PAN and KYC details in their folios shall, inter-alia, be eligible to get dividend only through electronic mode after updating PAN and KYC Details, Bank Account Details and Specimen Signature in their folios. Such shareholder(s) are also requested to provide a ‘choice of nomination’ to facilitate the smooth transmission of their securities.