A dividend is a type of income that a person receives if he or she invests in shares or mutual funds. Such types of dividends received by the people who invest in shares and mutual funds are a type of income. Many shares and mutual funds schemes distribute these dividends to their investors. However, it is uncertain whether dividends are taxed or not, if yes, then the question arises regarding how they are taxed, we will know more in this article.
There are a plethora of sources of dividends. One can receive dividends from the following sources These are mentioned below:
These are the sources by which one can receive dividends.
Provisions related to the taxability of dividend income are given below. These include both old and new provisions.
Also, the taxability of dividend income depends upon whether dividends receive deals in securities either as a trader or as an investor. The income will be taxed under the head business income if a person earns an income from trading activities. The dividend will be taxed under the head of business or profession if the shares are held for trading purposes.
If a person is holding shares as an investment, then the income arising from that dividend will be taxable under the head of income from other sources.
According to section 8 of the Finance Act, the Dividend income shall be taxable in the year in which it is declared, distributed, and paid by the company. It is done out of whichever option is earlier. Whereas, in the case of an interim dividend, it is taxable in the previous year in which the amount of such dividend is unconditionally made available by the company to the shareholder. In other words, it can be concluded that an interim dividend is taxable on a receipt basis.
No interest under Section 234C shall be charged if the person has failed to pay an advanced tax installment on an account of dividend income. However, it should be provided that the assessee has paid full tax in subsequent advance tax installments. However, this benefit is not available for deemed dividends.
Dividends received from a foreign company are taxed separately both in India and in the home country of that foreign company.
The dividend Distribution Tax is a tax imposed by the Indian government on Indian companies according to the dividend paid by the company to its investors.
Yes, dividends are income under Income Tax Act.