As per the Finance Act, 2020 provisions of the TDS section194 have been amended. This provides for TDS on Dividend income declared, distributed, and paid by a company within the country which was priorly exempted from income tax under section 10(34). This was followed by the ending of the DDT (dividend distribution tax) on the sum of dividends declared by a company in the country. Let us understand section 194 for proper compliance.
We all love "money". Many of us, our friends, family and others, buy shares of large companies hoping to get a good return in terms of price appreciation and dividends. The dividend is only the equity profit (and interest) of the company's shareholders and section 194 requires a tax deduction on the amount of such dividend to be paid to the shareholders.
A company's director, which is in the procedure of declaring a dividend (equity or interest or both) in India, seeks to deduct tax on a dividend included in sub section (a) or (b) if he is (c) or (d) or (e) of subsection 22 of section 2. But from 1.4.2003, it will be the same this contribution of TDS and distribution in terms of subsection 2 (22) (e) which included distribution u/ s 2(22) (a) or (b) or (c) or (d) excluded from shareholders.
The TDS rate in this case is 10%. In this, TDS will be deducted at the time of payment (by cash, cheque, credit, etc.) or draft, whichever is earlier.
As a shareholder no tax deduction will be made under section 194 (who is an individual), when:
Section 2 Section 22 deals with the declaration of dividends as per the Income Tax Act.
A distribution includes any distribution by a company of retained earnings, whether or not such distribution is made by the company to all of its shareholders or any part of the company's assets.
In this, Dividends involve any distribution made to the shareholders of a company on its destruction, to the extent that such distribution connects to the cumulated profits of the company instantly after the liquidation, whether incorporated or not.
Dividends involve any distribution to its shareholders by a company on the reduction of its capital to the range that the company holds accumulated profits, whether incorporated or not.
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