TDS on Dividend: Overview
Under Section 194 of the Income Tax Act, 1961, companies distributing dividends are required to deduct TDS (Tax Deducted at Source) before making payments to shareholders. This applies when the dividend amount exceeds ₹5,000 in a financial year.
Our comprehensive TDS on dividend services include:
- Calculation of correct TDS amount as per applicable rates
- Timely deposit of TDS with government authorities
- Quarterly filing of Form 26Q (TDS returns)
- Issuance of Form 16A to shareholders
- Handling lower/nil deduction certificate cases
Deduct TDS on dividends correctly for every shareholder
- Shareholder PAN and residential status checked
- Correct rate applied for resident and non-resident shareholders
- Returns filed and Form 16A issued
Key Legal Provisions
Section 194
Mandates TDS deduction @10% on dividend payments exceeding ₹5,000 annually to resident shareholders.
Section 195
Governs TDS on dividend payments to non-resident shareholders with different rates.
Rule 30
Specifies due dates for TDS payment after deduction.
Form 26Q
Quarterly TDS return form for reporting dividend payments and deductions.
TDS on Dividend Compliance Process
TDS Calculation
Compute correct TDS amount based on shareholder status and applicable rates
TDS Payment
Deposit TDS with government by 7th of next month using Challan 281
Form 26Q Filing
File quarterly TDS returns with NSDL by due dates
Form 16A Issuance
Issue TDS certificates to shareholders within 15 days of return due date
Annual Compliance
Reconcile TDS credits in Form 26AS and prepare annual reports
Record Keeping
Maintain proper records for 6 years as per tax laws
TDS Rates on Dividend (FY 2023-24)
Resident Shareholders
10% TDS if dividend exceeds ₹5,000 in a financial year
(No surcharge or cess if PAN provided)
Non-Resident Shareholders
20% TDS (plus applicable surcharge and cess)
Lower rates may apply under DTAA
Domestic Companies
10% TDS if dividend exceeds ₹5,000
(No DDT since April 2020)
Foreign Companies
20% TDS (plus surcharge and cess)
Subject to DTAA benefits if any
TDS on Dividend Compliance Due Dates
TDS Deduction
At the time of credit or payment, whichever is earlier
TDS Payment
7th of next month (e.g., TDS for April paid by 7th May)
Form 26Q Filing
Quarterly - 31st July, 31st Oct, 31st Jan, 31st May
Form 16A Issuance
Within 15 days from due date of return filing
Transparent Pricing
| Service | Basic | Comprehensive |
|---|---|---|
| TDS Deduction & Payment | ₹999/month | ₹2,499/quarter |
| Form 26Q Filing | ₹1,499/return | ₹4,999/annual |
| Form 16A Generation | ₹49/certificate | ₹999/unlimited |
| Full TDS Compliance | ₹7,999/year | ₹12,999/year |
Common Mistakes to Avoid
Dividend TDS mistakes affect every shareholder, so they are worth avoiding.
- Missing PAN details – Without PAN, TDS applies at a higher rate.
- Ignoring Form 15G/15H – Eligible resident shareholders can submit these to avoid TDS.
- Wrong rate for non-residents – Treaty rates need a TRC and Form 10F.
- Late deposit – Interest applies for delayed deposit.
- Not issuing Form 16A – Shareholders need certificates to claim credit.
After Declaring a Dividend
Collect shareholder declarations
PAN, residency and exemption forms gathered.
Deduct and deposit
TDS deducted at the right rate and deposited on time.
File returns
26Q for residents and 27Q for non-residents.
Issue certificates
Form 16A to every shareholder.
Helpful Guides
Free, plain-English guides from our compliance team:
Why Choose Vaidam Consultancy for TDS on Dividend
Shareholder-wise checks
Each shareholder’s PAN, residency and declarations are verified.
Treaty rates applied
Non-resident shareholders get treaty benefits where documents are provided.
Clear, upfront pricing
Our fees are listed on this page, and any government fee is shown separately before we start.
Complete paperwork
Returns, certificates and records are kept ready for audit.
Frequently Asked Questions
TDS applies only when dividend exceeds ₹5,000 to a shareholder in a financial year. No TDS if aggregate dividend is ₹5,000 or less.
TDS rate increases to 20% if PAN is not provided by the shareholder as per Section 206AA.
Shareholders can claim credit for TDS deducted by showing Form 16A while filing their income tax return. The amount appears in their Form 26AS.
Yes, certain entities like LIC, GIC, and other specified institutions are exempt under Section 194. Also, dividends covered under Section 10(34) are exempt in hands of recipients.
Under Section 194, TDS is generally 10% for resident shareholders, rising to 20% if PAN is not provided. Small dividends to resident individuals below the annual threshold are not subject to TDS.
Dividends to non-residents fall under Section 195. TDS applies at the Income Tax Act rate or a lower treaty rate if the shareholder provides a Tax Residency Certificate and Form 10F.
Resident individuals with no tax liability can submit Form 15G or 15H, where eligible, to avoid deduction.
Yes, generally, unless a specific exemption or lower deduction certificate applies.