Total income not taxable? You can get relief on TDS on dividend income; here’s how
With the removal of dividend distribution tax (DDT) tax deducted at source (TDS) is applied on dividend income under Section 194 of the Income Tax Act. Due to this dividend income above Rs 5,000 is taxed at the rate of 10% in the hands of investors where the PAN is available. The TDS rate is 20% in case PAN is not available.
Dividend income and TDS will be available on the new format of Form 26AS to make filing of Income Tax Return easier and make it difficult to suppress income.
In case the total dividend income, including dividend income is not taxable or amounts to not more than Rs 2.5 lakh then filing of Income Tax Return will become necessary due to TDS charged on dividend income to get due tax refunds from the Income Tax Department.
However, in case the total income of an individual is less than Rs 2.5 lakh in a financial year, Form 15G for those up to 60 years of age, or Form 15H, for senior citizens, can be used just like in case of Fixed Deposit, to avoid being charged TDS on same. Similarly, for dividend income from shares, an individual may submit Form 15G or Form 15H directly.
According to IT Department, a payee can approach to the payer for non-deduction of tax at source but for that they have to furnish a declaration in Form No. 15G/15H, as the case may be, to the payer to the effect that the tax on his estimated total income of the previous year after including the income on which tax is to be deducted will be nil. Form 15G is for the individual or a person (other than company or firm) and Form 15H is for the senior citizens.
For dividend payout option of mutual fund schemes, the suitable form either 15H or 15G may be submitted directly to the Asset Management Company (AMC) or to their Registrar and Transfer Agents (RTA) like CMAS and KFintech, branch of Karvy.
For applying for mutual fund schemes through RTAs, details to be entered are PAN, name of fund house (AMC), folio number, estimated income from income distribution cum capital withdrawal option (IDCW), expected total income in the financial year and year for declaration.
In case the total income is not taxable and IDCW is part of income then the individual should submit Form 15 or Form 15H. If not, the taxpayer has to file their ITR in case TDS has already been cut from dividend income.