Tax Deducted at Source
-------------------------------------------------
Dividends [Section 194]
(1) Dividends declared, distributed or paid by a domestic company are exempt in the hands of the shareholder under section 10(34). This includes deemed dividend under sections 2(22)(a) to (d). This is because such dividend attracts dividend distribution tax @ 12.5% in the hands of the company. (2) The TDS provisions under this section are attracted only in respect of deemed dividend referred to in section 2(22)(e), if such dividend exceeds Rs. 2,500 in a year. (3) The rate of deduction of tax in respect of such dividend is 20% plus surcharge, if applicable, plus education cess. (4) Under the proviso to section 194, individual shareholders, who are residents in India, are entitled to receive their dividends from any domestic company without deduction of tax at source by the company in cases where - * the amount of dividend income received from the company does not exceed Rs. 2500 during the year;
-------------------------------------------------
Interest other than interest on securities [Section 194 A]:
This section deals with the scheme of deduction of tax at source from interest other than interest on securities. The main provisions are the following:
(1) This section applies only to interest, other than “interest on securities”, credited or paid by assesses other than individuals or Hindu undivided families. In other words, companies, firms, association of persons, local authorities and artificial juridical persons are under a legal obligation to deduct tax at source in respect of the interest other than “interest on securities” paid by them.
(2) Where any such interest is credited to any account in the books of account of the person liable to pay such income, such crediting is deemed to be credit of such income to the account of the payee and the tax has to be deducted at source.
(3) The account to which such interest is credited may be called “Interest Payable
Dividends [Section 194]
(1) Dividends declared, distributed or paid by a domestic company are exempt in the hands of the shareholder under section 10(34). This includes deemed dividend under sections 2(22)(a) to (d). This is because such dividend attracts dividend distribution tax @ 12.5% in the hands of the company. (2) The TDS provisions under this section are attracted only in respect of deemed dividend referred to in section 2(22)(e), if such dividend exceeds Rs. 2,500 in a year. (3) The rate of deduction of tax in respect of such dividend is 20% plus surcharge, if applicable, plus education cess. (4) Under the proviso to section 194, individual shareholders, who are residents in India, are entitled to receive their dividends from any domestic company without deduction of tax at source by the company in cases where - * the amount of dividend income received from the company does not exceed Rs. 2500 during the year;
-------------------------------------------------
Interest other than interest on securities [Section 194 A]:
This section deals with the scheme of deduction of tax at source from interest other than interest on securities. The main provisions are the following:
(1) This section applies only to interest, other than “interest on securities”, credited or paid by assesses other than individuals or Hindu undivided families. In other words, companies, firms, association of persons, local authorities and artificial juridical persons are under a legal obligation to deduct tax at source in respect of the interest other than “interest on securities” paid by them.
(2) Where any such interest is credited to any account in the books of account of the person liable to pay such income, such crediting is deemed to be credit of such income to the account of the payee and the tax has to be deducted at source.
(3) The account to which such interest is credited may be called “Interest Payable