Income Tax, Mutual Funds, Shares

Tax on dividend income

I have received a query from one of the readers about the tax or income tax on dividend income from shares or stocks. The query is following:

I have received 100% dividend on a share of company ‘A’ of face value rs. 10. I have 100 shares of that company. What will be the income tax and rate of income tax?

Answer: As the share is of Rs. 10 face value thus the dividend will be Rs. 10 per share because divided declared is 100%.  As the person holds 100 shares of company ‘A’, the total dividend will be 10 x 100 = Rs. 1000. The income received through dividend is 100% tax-free.

It means you  need not to pay income tax on income received through dividend whatsoever the amount will be.

The dividend income is exempted under section 10(34) of income tax if you received the dividend from an Indian company. This is so because the company already paid the divided distribution tax to the government.

There is also no tax on dividend income received from mutual funds. But you may show your income in income tax return form as income from other sources and exempted income.

Also read: Calculation of income tax?

Thus you can search such Indian companies where dividend pay out is good because there is no income tax on dividend income. happy investing!!

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