InvestorQ : How dividends shall be taxed from the financial year 2020-21 and what are forms 15H and 15G?
Shobit Khurana made post

How dividends shall be taxed from the financial year 2020-21 and what are forms 15H and 15G?

Answer
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Gauravi Patel answered.
1 month ago


Earlier, dividend income in the hands of shareholders was tax-free and the companies distributing dividends were liable to pay any tax on such income. However, in the Union Budget 2020, the finance minister has announced that dividends shall be taxable in the hands of shareholders and no consequent section has been introduced to the exempt minimum dividend received.

Therefore, any amount of dividend received by the shareholders in the form of dividends shall be taxable. This has also given rise to extra compliance for the companies in form of Tax Deducted at Source (TDS), as any dividend payment by companies shall be liable for TDS deduction at the rate of 10%.

In the case of individuals, there is one concession, i.e. the TDS is only to be deducted if the total dividend paid to that shareholder shall be less than Rs. 5000 from a particular company. The income-tax department has also provided the facility to senior citizens and other individuals who do not have any taxable income. In that case, the funds will be unnecessarily blocked and one has to file a return just to claim TDS deducted.

Therefore, the IT department has introduced 2 forms to address this issue:

1.Form 15H: It is applicable to senior citizens who do not have any taxable income. Any senior citizen who expects that his taxable income would be NIL, he can file the said form and submit it to the mutual fund or company from which income is expected during the year.

2.Form 15G: It is applicable to any other individual who not has any taxable income during the year.
This to be kept in mind, taxpayers need to file a separate form with every mutual fund or company in which they have any investment.