Deduction of Tax at source on Dividend
In terms of the provisions of the Income Tax Act, 1961 (“the Act”), dividend declared or distributed or paid by a Company is taxable in the hands of the Shareholders. The Company is therefore required to deduct tax at source at the time of distribution or payment of the said dividend. The Tax Deducted at Source (“TDS”) will be paid to the Central
Government (refer Note 1 for details).
The TDS rates may vary depending on the residential status of the Shareholder and the documents submitted to the Company
in accordance with the applicable provisions of the Act. The TDS for various categories of Shareholders along with required
documents are provided in Table 1 and 2 below
Table 1: Resident Shareholders
Category of Shareholder |
TDS Rate |
Exemption applicability/ Documentation requirement |
Individuals having PAN |
10% |
Update valid PAN, if not already done, with depositories (in case of shares held in demat mode) and with the Company's Registrar and Transfer Agent - KFin Technologies Limited ('KFin')
(in case of shares held in physical mode). Refer Note 2 and 3 for more details.-
No taxes will be deducted in the following cases -
-
If dividend income during FY 2022-23 does not exceed ₹ 5,000/- (Refer Note 4)
-
Resident Individual Shareholder below age of 60 years, providing Form 15G (Refer Note 5)
-
Resident Individual Shareholder of age 60 years and above, providing Form Form 15H (Refer Note 5)
|
Insurance Companies |
NIL |
Declaration along with documentary evidence that the provisions of section 194 of the Act are not applicable along
with self-attested copy of PAN card (Refer Note 6) |
Persons Covered under Section 196 of the Act (e.g. Govt., RBI, Corporations |
NIL |
Declaration along with documentary evidence that it is covered under section 196 of the Act along
with self-attested copy of PAN card (format attached herewith as Annexure - 6) |
established by Central Act and exempt from income tax) |
|
|
Mutual Funds specified under clause (23D) of section 10 of the Act |
NIL |
Declaration that it is exempt from tax under section 10(23D) of the Act along with self-attested copy of registration certificate or notification,
as the case may be and PAN card (format attached herewith as Annexure - 7)
. |
Alternative Investment Fund ('AIF') |
NIL |
Declaration that AIF income is exempt under section 10(23FBA) of the Act as it has been granted
a certificate of registration as a Category I or Category II AIF under the SEBI (AIF) Regulations,
2012 (format attached herewith as Annexure - 8)
along with along with self-attested copy of registration documents and PAN card.
|
Recognized Provident Fund |
NIL |
Declaration (format attached herewith as Annexure 6) along with self-attested copy of following documents:
-
PAN Card; and
-
Valid order from Commissioner u/r 3 of Part A of Fourth Schedule to the Act, or
- Self-attested valid documentary evidence (e.g., relevant copy of registration, notification, order, etc.) in support of the provident fund being established under a
scheme framed under the Employees Provident Funds Act, 1952.
|
Approved Superannuation Fund / Approved Gratuity Fund |
NIL |
Declaration (format attached herewith as Annexure 6) along with self-attested copy of following documents:
- PAN Card; and
- Valid approval granted by the Commissioner:
- U/r 2 of Part B of Fourth Schedule to the Act (In case of Approved Superannuation Fund)
- U/r 2 of Part C of Fourth Schedule to the Act (In case of Approved Gratuity Fund)
|
New Pension System ('NPS') Trust |
NIL |
Declaration that NPS Trust income is exempt under section 10(44) of the Act (format attached herewith as Annexure 6)
along with self-attested copy of
registration document for establishment of said trust under the Indian Trust Act, 1882 and PAN card. |
Entities exempt under Section 10 of the Act |
20% |
Declaration duly signed with stamp affixed for the purpose of claiming exemption from TDS in terms of
Circular No. 18/2017 dated May 29, 2017 issued by the Central Board of Direct Taxes as regards requirement
of TDS in case of entities whose income is exempt under section 10 of the Act (copy attached herewith as Annexure - 6)
along with self-attested copy of PAN card.
Copy of the circular is attached herewith as Annexure - 1 |
Other resident Shareholder without PAN or having Invalid PAN |
20% |
|
Non-filers of income-tax return - section 206AB |
20% |
Refer Note 8 for more details |
Shareholders who have valid certificate issued u/s 197 |
Rate provided in the order |
Declaration along with self-attested copy of valid certificate issued u/s 197 of the Act. |
Table 2: Non-resident Shareholders
Category of Shareholder |
TDS Rate |
Applicability of surcharge |
Foreign Companies |
20% plus applicable surcharge and health and education cess of 4% |
-
For dividend income upto ₹ 1 Crore, no surcharge is applicable
-
For dividend income exceeding ₹ 1 Crore upto ₹ 10 Crore, surcharge of 2% on TDS is applicable
- For dividend income exceeding ₹ 10 Crore, surcharge of 5% on TDS is applicable
|
Foreign Firms |
Foreign Firms |
- For dividend income upto ₹ 1 Crore, no surcharge is applicable
- For dividend income exceeding ₹ 1 Crore, surcharge of 12% on TDS is applicable
|
Alternate Investment Funds subject to furnishing of a self-declaration. |
10% plus applicable surcharge and health and education cess of 4% |
-
|
Non-Resident member who are tax residents of Notified Jurisdictional Area as defined under Section 94A(1) of the Act |
30% plus applicable surcharge and health and education cess of 4% |
- |
Other Non-Resident Shareholders |
20% plus applicable surcharge and health and education cess of 4% |
- For dividend income upto ₹ 50,00,000, no surcharge is applicable
- For dividend income exceeding ₹ 50,00,000 upto ₹ 1 Crore, surcharge of 10% on TDS is applicable
- For dividend income exceeding ₹ 1 Crore, surcharge of 15% on TDS is applicable
|
Shareholders who have valid certificate issued u/s 197 |
Shareholders who have valid certificate issued u/s 197 |
- |
In respect of non-resident shareholders (including foreign companies), the TDS rates mentioned
above will be further subject to any benefits available under the Double Taxation Avoidance Agreement (DTAA)
read with Multilateral Instrument (MLI) provisions, if any, between India and the country in which the non-resident
is considered resident in terms of such DTAA read with MLI. The Tax Treaty rate shall be applied for tax deduction
at source on submission of following documents to the Company:
-
Copy of PAN Card, if any, allotted by the Indian authorities
-
Self-attested copy of Tax Residency Certificate valid as on the Record Date, obtained from the tax authorities of
the Country of which the Shareholder is resident
-
Self-declaration in Form 10F (format attached herewith as Annexure - 9)
-
Self-declaration confirming not having a Permanent Establishment in India and eligibility to
Tax Treaty benefit (format attached herewith as Annexure - 10)
-
Self-declaration regarding 'Principle Purpose Test' (if any) as applicable to respective
Treaty (format attached herewith as Annexure - 10)
-
Self-declaration as regards beneficial ownership (format attached herewith as Annexure -10)
The Company is not obligated to apply the beneficial DTAA rates at the time of tax deduction / withholding on dividend amounts. Application of beneficial DTAA Rate shall depend upon the completeness and satisfactory review
by the Company, of the documents submitted by Non- Resident member.
In case of Foreign Institutional Investors, Foreign Portfolio Investors, self-attested copy of certificate of registration accorded under the
relevant regulations of the SEBI is also required.
TDS shall be deducted at 20% (plus applicable surcharge and cess), if any, if the above mentioned documents are not provided
Kindly note that the documents as mentioned in the Table 1 and 2 above are required to be uploaded
with KFin at
https://ris.kfintech.com/form15 or emailed
to
einward.ris@kfintech.com. No communication on
the tax determination / deduction shall be considered after November 01,
2022 in order to enable the Company to determine and deduct appropriate TDS / withholding tax rate.
Notes:
-
In due compliance of the applicable provisions of the Act, the Company will be issuing certificate for tax deducted at source in Form 16A. The credit for tax deducted at source can also be verified by the Shareholder by verifying Form 26AS, after the statement of tax deducted at source is furnished by the Company and
thereafter Annual Information Statement (Form 26AS) is updated.
-
In case dividend income under the provisions of the Act is chargeable to tax in hands of any other person other
than the Registered Shareholder, then, a declaration to that effect is required to be submitted in terms of section
199 of the Act read with Rule 37BA of the Income Tax Rules, 1962 (format attached herewith as Annexure - 2). On such submission, the Company will
deduct tax in the name of such person, which would be due compliance of law on the part of the Company.
-
The Shareholders holding shares under multiple accounts under different status / category and single PAN, may note that, higher of the tax as applicable to the status in which shares held under a
PAN will be considered on their entire holding in different accounts.
-
In case of any further dividend which is paid in the FY 2022-23 and considering the amount of dividend payments made earlier, if the aggregate dividend pay-out exceeds ₹ 5,000/-, then, from the subsequent payment of dividend, the tax on the current as well as on earlier amount of dividend will be deducted and accordingly, the balance amount of dividend
will be paid to the concerned Individual Shareholder.
-
The Company, in compliance with the provisions of the Act, will allot unique identification number and the declarations will be furnished along with the statement of deduction of tax to the income tax
authority (Form 15H/15G attached herewith as Annexure - 3 & 4).
-
Insurance companies: The Life Insurance Corporation of India, The General Insurance Corporation of India, The National Insurance Company Limited, The New India Assurance Company Limited, The Oriental Insurance Company Limited, The United India Insurance Company Limited and any other insurer, as per section 2(28BB) of the Act. In case of any other insurer, self-attested copy of registration is to be furnished. If shares are not owned but have full beneficial interest, then,
a declaration to that effect (format attached herewith as Annexure - 5).
-
In terms of section 139AA of the Act read with rule 114AAA, Aadhaar number is required to be linked with PAN by March 31, 2023. In case of failure of linking Aadhaar number with PAN within the prescribed timeline, PAN shall be considered inoperative and, in such scenario, tax shall be deducted at higher rate of 20%. Therefore, Shareholders are
advised to link Aadhaar number with PAN if not done.
-
TDS to be deducted at higher rate in case of non-filers of Return of Income as per section 206AB of the Act which requires the Company to deduct tax at higher of the following rates in
case of a 'specified person':.
-
At twice the rate specified in the relevant provision of the Act; or
-
At twice the rates or rates in force; or
-
At the rate of 5%; or
-
At the rate of 20%, if section 206AA is applicable
The term 'specified person' means a person who:
-
has not filed return of income for the assessment year relevant to the previous year immediately prior to the previous year in which tax is required to be deducted, for
which the time limit of filing return of income under sub-section (1) of section 139 has expired; and
-
is subjected to tax deduction/collection at source in aggregate amounting to ₹ 50,000/- or more in the said previous year.
A non-resident who does not have a permanent establishment is excluded from the scope of a specified person. Accordingly, non-resident shareholders are requested to provide declaration in format attached herewith as Annexure 10 attached herewith if they do not have permanent establishment
and hence should not be considered as specified person.
The Income Tax Department has through the reporting portal utility, made available the list of 'specified person' for the purpose of section 206AB which shall be obtained at the time of deduction of TDS and accordingly, for those Shareholders who are classified as a specified person under section 206AB,
TDS on the dividend amount will be deducted at higher rate of 20%.
- The provisions of the tax treaty rate shall be applied even if tax is deductible under section 196D. Therefore, under both section i.e. section 195/196D, the treaty provisions can be applied, subject to submissions of documents as mentioned above. However, the Company is not obligated to apply the Tax Treaty rates at the time of tax deduction/withholding on dividend amounts, if the completeness of documents submitted by the non-resident Shareholder is not to the satisfaction of the Company, including not in accordance with the provisions of the Act. The Company, in compliance of section 195 of the Act, will furnish information relating to the payment of dividend and deduction of tax at source thereon in Form 15CA by the Company and 15CB by a Chartered Accountant, as applicable.
-
In case tax on dividend is deducted at a higher rate in the absence of receipt of the aforementioned details / documents, the concerned Shareholder would still have the option of claiming refund of the excess tax deducted at the time of filing the income tax return. No claim shall
lie against the Company for such taxes deducted.
-
The above is only to facilitate the Shareholder so that appropriate TDS is deducted on the dividend amount
in accordance with the applicable provisions of the Act.
Shareholders may have already noted the tax implications in case their PAN is not registered with the Company/RTA/Depository Participants including non-linking of Aadhaar and non-filing of Returns.
Further, it may be noted that:
-
In terms of section 139A of the Act, it is mandatory to quote PAN if tax is deductible on the dividend amount at source under section 194 of the Act. Such non-quoting shall attract
penalty of ₹ 10,000/- under section 272B of the Act.
-
SEBI has mandated the submission of PAN by every participant in the securities market
Accordingly, Shareholders are once again requested to submit their PAN to the Depository Participants with whom they maintain their demat accounts, in case of holding in electronic form. Shareholders holding shares in physical form should submit their PAN to the Company/RTA. In case of failure to do so, it shall
be presumed that you don't have PAN under the Act.
Disclaimer: The information set out herein above is included for general information purposes
only and does not constitute legal or tax advice. Since the tax consequences are dependent on facts
and circumstances of each case, the investors are advised to consult their own tax consultant with
respect to specific tax implications arising out of receipt of dividend.
We seek your co-operation in the matter.
-
Click Here to download Circular No. 18/2017 dated May 29, 2017
-
Click Here to download beneficial ownership declaration (Rule 37BA(2))
-
Click Here to download - Form 15H
-
Click Here to download - Form 15G
-
Click Here to download - Declaration from insurance companies
-
Click Here to download - Declaration from Corporation established by or under a Central Act
-
Click Here to download - Declaration from Mutual Funds
-
Click Here to download - Declaration from Alternative Investment Fund
-
Click Here to download - Form 10F
-
Click Here to download - Declaration from Non-resident
Yours faithfully,
For Dabur India Limited
Sd/-
A.K. Jain
E.V.P (Finance) & Company Secretary