Tax On Dividend Income in India: Everything you need to know

Dividend income is money that you earn from owning shares in a company. This can come in the form of stocks, mutual funds, or even exchange-traded funds (ETFs). In India, dividend income is taxed at 10% if it’s below ₹10 lakhs (1 million) per year. If you’re someone who earns dividend income, it’s important to know how it’s taxed in India. In this blog post, we will explore everything you need to know about tax on dividend income in India. From the applicable tax rate to eligible deductions, we will cover all the bases so that you can be better informed about this topic.

What is the Tax On Dividend Income in India?

The tax on dividend income in India is a bit complicated. There are three types of taxes that can be levied on dividends:

1. Dividend distribution tax (DDT): This is a tax levied by the Indian government on companies that distribute dividends to their shareholders. The rate of DDT is 15%, and it is payable by the company.

2. Capital gains tax: This is a tax levied on shareholders when they sell their shares for a profit. The rate of capital gains tax depends on how long the shareholder has held the shares, and it ranges from 10% to 20%.

3. Income tax: This is a tax levied on individuals based on their annual income. The rate of income tax depends on the individual’s income bracket, and it ranges from 5% to 30%.

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As you can see, the tax on dividend income in India can be quite complex. However, if you consult with a financial advisor or accountant, they should be able to help you determine which taxes apply to your situation.

Who is Eligible for the Tax On Dividend Income in India?

Dividend income is taxed in India. The tax rate on dividend income depends on the amount of dividend income and the taxpayer’s tax bracket.

Dividend income is taxed at the following rates:

-10% for taxpayers in the 10% tax bracket
-20% for taxpayers in the 20% tax bracket
-30% for taxpayers in the 30% tax bracket

To be eligible for the tax on dividend income, Indian residents must have earned dividend income from an Indian company during the financial year. Non-residents are not eligible for the tax on dividend income.

What is the Rate of Tax On Dividend Income in India?

In India, the rate of tax on dividend income is 10%. However, this rate may vary depending on the total amount of dividend income received and the taxpayer’s tax bracket.

When is the Tax On Dividend Income in India payable?

In India, the tax on dividend income is payable at the time of declaration of the dividend by the company. The tax is deducted at source by the company at the time of payment of dividend to the shareholder. The shareholders are liable to pay tax on their share of dividend income as per their Income Tax slab rate.

The following points must be kept in mind while computing taxes on dividend income:

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-Dividend received from a foreign company is taxable in India.

-Dividend received from an Indian company is exempt from tax if it is declared and paid out of profits which have been subjected to corporate tax.

-If an investor holds shares in more than one company, he/she will be liable to pay taxes on dividend income from each company separately as per his/her Income Tax slab rate.

How to file for the Tax On Dividend Income in India return?

Filing the Tax on Dividend Income in India return is a simple and straightforward process. Here are the steps you need to follow:

1. Gather all the necessary documents. This includes your Form 16/16A ( issued by your employer or bank/financial institution), PAN card, and other relevant documents.

2. Log onto the e-filing portal of the Income Tax Department.

3. Register yourself on the portal, if you haven’t already done so.

4. Fill in your personal details like name, address, PAN number, etc.

5. Select ‘ITR form’ under which you want to file your return. For instance, if you are an individual with income from salary and interest income, then you would choose ITR-1 form.

6. Fill in all the required details in the ITR form carefully and cross-check before submitting it online.

7. Once you have submitted the form, take a print out of the acknowledgement for future reference


If you are an investor in India, it is important to be aware of the tax on dividend income. Although the tax rate is relatively low, it can still have a significant impact on your overall return. By understanding the rules and regulations surrounding this tax, you can minimize its impact and maximize your profits.

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