Residents & Non-residents net dividend w.e.f 01.04.2020
Dividend Taxability provisions of Income Tax Act effective April 1 , 2020.
Recently, there have been numerous changes in dividend tax regulations.
Following are the tax rate provisions applicable to residents and non-residents with effect from 1 April 2020, the situation in which dividend would be taxable, and the expense that would be permitted as income deduction.
1. Dividend is taxed @ 20% in the possession of Non-Resident (not a business)/Foreign business
2. The dividend earned by the Indian Business from a foreign firm owning at least 26 % of the total equity capital of the foreign company shall be taxed @ 15%
3. Indian Company's income outside India is taxable in India.
i. In this Section 9 provision, Dividend paid by Indian corporations is only taxable in receiver's hands. If the dividend was paid by the business having POEM in India as per section 6 of the Income Tax Act, however that business is not an Indian entity, otherwise the dividend paid by that company outside India is not taxable.
Ii . Ii. Similarly, dividends paid by business-connected assessee in India and such assessee is not an Indian Company, dividends paid by such business-connected company in India are not taxable in India.
4. Up to 20 percent of income can be deducted from Dividend income due to Interest Expense u / s 57 of Income Tax Act. But, the assessee would have to prove that such amount of loan was taken to invest in the company's shares.
5. No other expense is permitted to deduct from Dividend Income other than interest expense.
6. Deduction to Domestic Company is available to the extent that the dividend received is limited to the dividend distributed by the company received from any other domestic company, foreign company or business trust up to the specified date , i.e. one month before the due date of the previous year's tax return.
7. Dividend TDS @10% 194 and 194 K for amounts exceeding INR 5000 per year
8. The resident assessee shall pay tax on dividend income at normal slab rates.
For Non-Residents and International Business, these assessee 's resident country's Income Tax Act or DTAA, whichever is advantageous will refer to the assessee.
Recently, there have been numerous changes in dividend tax regulations.
Following are the tax rate provisions applicable to residents and non-residents with effect from 1 April 2020, the situation in which dividend would be taxable, and the expense that would be permitted as income deduction.
1. Dividend is taxed @ 20% in the possession of Non-Resident (not a business)/Foreign business
2. The dividend earned by the Indian Business from a foreign firm owning at least 26 % of the total equity capital of the foreign company shall be taxed @ 15%
3. Indian Company's income outside India is taxable in India.
i. In this Section 9 provision, Dividend paid by Indian corporations is only taxable in receiver's hands. If the dividend was paid by the business having POEM in India as per section 6 of the Income Tax Act, however that business is not an Indian entity, otherwise the dividend paid by that company outside India is not taxable.
Ii . Ii. Similarly, dividends paid by business-connected assessee in India and such assessee is not an Indian Company, dividends paid by such business-connected company in India are not taxable in India.
4. Up to 20 percent of income can be deducted from Dividend income due to Interest Expense u / s 57 of Income Tax Act. But, the assessee would have to prove that such amount of loan was taken to invest in the company's shares.
5. No other expense is permitted to deduct from Dividend Income other than interest expense.
6. Deduction to Domestic Company is available to the extent that the dividend received is limited to the dividend distributed by the company received from any other domestic company, foreign company or business trust up to the specified date , i.e. one month before the due date of the previous year's tax return.
7. Dividend TDS @10% 194 and 194 K for amounts exceeding INR 5000 per year
8. The resident assessee shall pay tax on dividend income at normal slab rates.
For Non-Residents and International Business, these assessee 's resident country's Income Tax Act or DTAA, whichever is advantageous will refer to the assessee.
