Dividend income from shares is taxable

Are dividend income from shares of a non-resident Indian taxable?

– Name withheld on request

From fiscal year 21 onwards, dividend income from shares in an Indian company is taxable in India. In the case of a shareholder who qualifies as “Non-Indian Resident” under Income Tax Act, dividend income will be taxed at 20% plus applicable surcharge and 4% gross health and education drop-out. Thus, the applicable tax rate for dividend income for a “non-resident” is between 20.8% and 28.5%, depending on the total income and the surcharge.

In the case of a shareholder who qualifies as a resident of India, dividend income will be taxable at applicable ceiling rates.

Each benefit from the Double Taxation Agreement (DTAA) between India and the other country can be examined separately to avoid double taxation or to get a lower tax rate. The company will withhold dividend tax at either 20% plus the applicable surcharge and 4% of the health and educational drop-out or at a rate according to the DTAA, whichever is lower.

My relative received a certain amount in the NRI account in the 21st financial year. This amount was used to repay debt and has no regular transaction. Does my relative need to file an income tax return for the specified fiscal year?

– Name withheld on request

Under Indian Income Tax Law, an individual must file an income tax return if their gross taxable income exceeds the maximum non-income taxable amount. For fiscal year 21, the maximum amount that is not subject to income tax is £2.5 lakh.

To determine the threshold of £2.5 lakh of gross taxable income should be calculated prior to the deductions under Chapter VI-A (such as Section 80C, 80D, etc.) or capital gain rollover exemptions (such as Section 54, 54EC, 54F, etc.) ) be effective.

Even if the taxable gross income is lower £2.5 lakh, the law was recently amended to make an income tax return compulsory if a person (among other things): 1. has deposited an amount greater than than £1 crore on one or more current accounts held with a bank during the financial year; 2. Has spent more than than £2 lakh for yourself or another person for travel to a foreign country during the fiscal year; 3. Has spent more than than £1 lakh for electricity consumption in the fiscal year.

Sonu Iyer is a tax partner and head of HR at EY India.

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