Tax deduction at source on dividends requires withholding at prescribed rates for residents, non residents and companies during the financial year. Principal officers of Indian companies or companies making prescribed dividend arrangements must deduct tax at source on any dividend payment before payment or distribution. Payors must apply the specified withholding rates for resident and non resident persons - residents at a stated income tax rate plus surcharge; non residents at a higher income tax rate plus surcharge or, if greater, tax and surcharge computed under the alternative schedule. Companies receive different withholding treatment: domestic and non domestic companies are charged distinct income tax rates with corresponding surcharges.