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Calculation of income tax on dividend income

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Subbiah Mathurappan

122 Points Posted on 13 April 2023

We add dividend income with other incomes to arrive at income tax. Sometimes dividend is credited to account after deduction of TDS. In that case which dividend amount i e whole amount of dividend or net amount of dividend after TDS is to be taken for arriving at income tax. please clarify.

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Quick Summary

This discussion clarifies how to calculate income tax when you receive dividend income. It explains that the gross dividend amount, including any Tax Deducted at Source (TDS), should be used when calculating your total income for tax purposes. The TDS deducted is then available as a credit against your final tax liability.

Rama chary Rachakonda

Master in Accounts & high court Advocate

7021 Points Posted on 13 April 2023

The normal rate of TDS is 10% on dividend income paid in excess of Rs 5,000 from a company or mutual fund. However, as a COVID-19 relief measure, the government reduced the TDS rate to 7.5% for distribution from 14 May 2020 until 31 March 2021.
The tax deducted will be available as a credit from the total tax liability of the taxpayer while filing ITR.