Definition
Dividend Taxation
Dividends from Indian companies and mutual funds are taxable in the investor's hands at their slab rate, with TDS deducted by the payer above a threshold.
Since the abolition of the dividend distribution tax, dividends are taxed in the hands of the investor at their applicable income-tax slab rate, rather than the company paying tax before distribution. This applies to dividends from shares and from mutual funds' income-distribution options.
The payer deducts TDS on dividends above a specified annual threshold per investor, which is creditable against your total tax. Dividends appear in your AIS, aiding reconciliation.
For investors, this means high earners pay more tax on dividends than those in lower slabs, which influences the choice between dividend (income-distribution) and growth options in funds, and between dividend-yield and growth stocks.
Related terms
- REITA Real Estate Investment Trust is a SEBI-regulated, listed vehicle that owns income-generating commercial property and passes most of its rental income to unitholders as distributions.
- Form 26AS / AISForm 26AS and the Annual Information Statement are consolidated tax statements showing TDS, TCS, advance tax and reported financial transactions linked to your PAN.
- Capital Gains (Equity)Capital gains on equity arise when listed shares or equity funds are sold for profit, taxed as short-term or long-term depending on the holding period, with specific Indian rates.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.