I have received some dividend income from shares and mutual funds. After the rule change in 2020, is this dividend income taxable in India, and if yes, how should I show it in my ITR?
After 2020, the way dividends are taxed in India changed completely. Earlier, companies or mutual funds paid Dividend Distribution Tax (DDT) and dividends were tax-free in the hands of investors. But from April 1, 2020, the system shifted now, dividend income is fully taxable in the hands of the shareholder or unit holder.
How Dividend Income is Taxed?
• Taxable in your hands: Any dividend you receive from shares or mutual funds is added to your total income.
• Rate of tax: It is taxed at your applicable income tax slab rate (not at a flat rate).
• TDS on dividends: If total dividend from a company or mutual fund exceeds ₹5,000 in a year, they deduct TDS at 10% (reduced to 7.5% in FY 2020–21 due to COVID relief).
Reporting in ITR:
• Dividend income should be reported under “Income from Other Sources.”
• If TDS is deducted, it will reflect in your Form 26AS/AIS, and you can claim credit while filing your ITR.
• You can also deduct certain expenses (like interest on loans taken for investment in shares/mutual funds) up to 20% of the dividend income.
Official Reference:
You can check the Income Tax Department’s guidance on dividend taxation here:
https://www.incometax.gov.in