Budget 2025: Finance Minister Nirmala Sitharaman has also given a big gift to investors in the market in the budget of the next financial year 2025-26. He has doubled the limit of TDS (Tax Deed at Source) for dividend income i.e. dividend income. Currently, in the case of dividend income of more than 5 thousand rupees, a certain rate tax is deducted on the source itself, but now it is proposed to increase this limit to 10 thousand rupees from April 1. With this, investors will now be credited to dividend income full amount of up to Rs 10,000 and will not have to wait till the refund.
What is the rule now?
There is a provision under section 194 of the Income Tax Act that if a company is distributing dividend, then they will have to deduct tax at a fixed rate before creating the dividend shareholder account and submit it to the government. Right now this rate is 10 percent, that is, on dividend income of more than 5 thousand rupees, the company will credit the account at the rate of 10 percent. Now it has been proposed to increase the limit of this dividend income from 5 thousand rupees to 10 thousand rupees.
Earlier companies used to pay tax on dividend
Earlier companies had to pay taxes on dividend, which has now been put on investors. Companies had to pay tax under Dividend Distribution Tax (DDT) and were brought in the budget in 1997. Over time, it had a lot of changes and finally it was removed in the year 2020 and the tax liability was directly linked to shareholders. This was done so that transparency could increase and can be done according to global standards.