Union Budget 2025-26 (Full) + Finance Bill, 2025

Section 194 – Dividends

Section 194 of the Act requires that the principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment by any mode in respect of any dividend or before making any distribution or payment to a shareholder, who is resident in India, of any dividend within the meaning of all sub-clauses of clause (22) of section 2, deduct from the amount of such dividend, income-tax at the rate of 10%.

2. The first proviso to this section states that no tax is required to be deducted when the amount or aggregate of amounts of such dividend, distributed or paid or likely to be distributed or paid, during the financial year by the company to the shareholder, being an individual, does not exceed Rs. 5,000/-.

3. It is proposed to provide that no tax is required to be deducted when the amount or aggregate of amounts of such dividend, distributed or paid or likely to be distributed or paid, to the shareholder, being an individual, does not exceed Rs. 10,000/-.

4. This amendment will take effect from the 1st day of April 2025.

[Clause 52]

 

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Full Text:

Union Budget 2025-26 (Full) + Finance Bill, 2025

Dividend tax withholding: higher exemption threshold for individual shareholders reduces small-payment TDS obligations from next fiscal year. Section 194 requires the principal officer of an Indian company, or a company with prescribed arrangements for dividend payments (including preference shares), to deduct tax at source from dividend payments to resident shareholders at the rate provided in the section. The Finance Bill raises the aggregate exemption threshold for individual shareholders under the first proviso so that no tax is required to be deducted on small aggregate dividend payments, with the amendment effective from the start of the next fiscal year.