On February 1, 2025, at 11:00 AM, Finance Minister Nirmala Sitharaman gave the Parliament a presentation of the Union Budget 2025. The FM 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/-.
According to Section 194 of the Act, the principal officer of an Indian company or a company that has made the required arrangements for the declaration and payment of dividends (including dividends on preference shares) within India must deduct 10% income tax from the amount of the dividend before making any payments by any means or before distributing or paying any dividend to a shareholder who resides in India under the terms of all subclauses of clause (22) of section 2.
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In accordance with the first proviso of this section, no tax must be withheld if the total amount of dividends paid or distributed to an individual shareholder by the company during the fiscal year does not exceed Rs. 5,000.
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As a result of this modification, TDS will not be withheld from dividend income for individual shareholders up to ₹10,000 throughout a fiscal year. Any dividends over this threshold will be subject to TDS at the current rate.
TDS will now only be applied when dividend income surpasses ₹10,000, which relieves small investors by boosting cash flow and lessening the administrative load. As of April 1, 2025, companies and mutual funds that distribute dividends will have to modify their TDS procedures to meet the new threshold.
This proposal is a part of a larger initiative to streamline taxpayer tax compliance and rationalize TDS regulations. It was mentioned that the amendment will go into effect on April 1st, 2025.
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