Section – 194 of Income-tax Act, 1961: TDS on Dividends.

Section – 194 of Income-tax Act, 1961-2021 

TDS on Dividends.

Who is liable to deduct tax?

The principal officer of an Indian company or
a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India

Timing of deduction?

Before making any payment [by any mode] in respect of any dividend or

before making any distribution or payment to a shareholder, who is resident in India, of any dividend within the meaning of sub-clause (a),(b),(c),(d),(e) of section 2(22), deduct from the amount of such dividend, income-tax at the rate of 10%

Rate of TDS: 10%

Exceptions to section 194: provisions of this section shall not apply to such income credited or paid to:

👉An individual, if—

(a)  the dividend is paid by the company by any mode other than cash; and

(b)  the amount of such dividend or, as the case may be, the aggregate of the amounts of such dividend distributed or paid or likely to be distributed or paid during the financial year by the company to the shareholder, does not exceed Rs 5000

👉The Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), in respect of any shares owned by it or in which it has full beneficial interest; 

👉The General Insurance Corporation of India (hereafter in this proviso referred to as the Corporation) or to any of the four companies (hereafter in this proviso referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any shares owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest;

👉Any other insurer in respect of any shares owned by it or in which it has full beneficial interest; 

👉A "business trust", as defined in clause (13A) of section 2, by a special purpose vehicle referred to in the Explanation to clause (23FC) of section 10;

👉Any other person as may be notified by the Central Government in the Official Gazette in this behalf.

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