Part – 6 TDS on Dividend
Members may note that by virtue of the amendment to Income Tax Act, 1961 vide Finance Act, 2020 with effect from April 01, 2020, the Company will be required to withhold taxes at the prescribed rates on the dividend paid to its shareholders w.e.f. 1st April 2020. The withholding tax rate would vary depending on the residential status of the shareholder and documents registered with the Company.
In order to enable the Company to determine the appropriate TDS rate as applicable, members are requested to submit the following documents to in accordance with the provisions of the IT Act as detailed below:
A. RESIDENT SHAREHOLDERS:
Withholding tax rate
|1||Valid PAN updated in the Company’s Register of Members|
|2||No PAN/Valid PAN not updated in the Company’s Register of Members||20%|
|3||Availability of lower/nil tax deduction certificate issued by Income Tax Department u/s 197 of Income Tax Act, 1961 on furnishing lower tax deduction certificate obtained from Income Tax Authority||Rate specified in the certificate|
No tax shall be deducted on the dividend payable to a resident individual if the total dividend to be received by them during Financial Year 2020-21 does not exceed Rs. 5,000 and also in cases where members provide Form 15G/Form 15H (applicable to individuals aged 60 years or more) subject to conditions specified in the IT Act. The formats for Form 15G/15H are given below:
No tax will be withheld from Dividend to be paid to Mutual Funds and Category – I & II Alternate Investment Funds registered with SEBI. The Mutual Funds and Alternate Investment Funds shall, however, furnish the following documents to the Company’s RTA, KFin Technologies Private Limited.
a. Certified copy of SEBI Registration/CBDT notification;
b. Declaration that their income is exempt under Section 10 (23D) of the Income Tax Act, 1961 and therefore no TDS is required under Section 196 (iv) of the Income Tax Act, 1961.
PAN is mandatory for members providing Form 15G/15H or any other document as mentioned above.
B. NON-RESIDENT SHAREHOLDERS:
For non-resident shareholders, taxes are required to be withheld in accordance with the provisions of Section 195 and other applicable sections of the IT Act, at the rates in force. The withholding tax shall be at the rate of 20% (plus applicable surcharge and cess) or as notified by the Government of India on the amount of dividend payable. However, as per Section 90 of the IT Act, non-resident shareholders have the option to be governed by the provisions of the Double Tax Avoidance Agreement (DTAA) between India and the country of tax residence of the member, if such DTAA provisions are more beneficial to the shareholder. For this purpose, i.e. to avail the benefits under the DTAA, non-resident shareholders will have to provide the following:
– Self-attested copy of the PAN card allotted by the Indian Income Tax authorities
– Self-attested copy of Tax Residency Certificate (TRC) for the FY 2020-21 obtained from the revenue authorities of the country of tax residence
– Self-declaration in Form 10F (Click here to download Form 10F)
– Self-declaration for the financial year 2020-21 [ Click here to download the self-declaration format], certifying the following:
- Shareholder is and will continue to remain a tax resident of the country of its residence during the Financial Year 2020-21
- Shareholder is eligible to claim the beneficial DTAA rate for the purposes of tax withholding on dividend declared by the Company
- Shareholder has no reason to believe that its claim for the benefits of the DTAA is impaired in any manner
- Shareholder is the ultimate beneficial owner of its shareholding in the Company and dividend receivable from the Company; and
- Shareholder does not have a taxable presence or a permanent establishment in India during the financial year 2020-21
– Any other documents as prescribed under the IT Act for lower withholding of taxes if applicable, duly attested by member
Please note that the application of beneficial DTAA rate at the time of tax deduction / withholding on Dividend shall depend upon the completeness and satisfactory review by the Company of the documents submitted by Non-resident shareholder. In case of Foreign Institutional Investors / Foreign Portfolio Investors, tax will be deducted under Section 196D of the IT Act @ 20% (plus applicable surcharge and cess).
C. SUBMISSION OF DOCUMENTS
Click here to submit the exemption forms online.
The aforementioned documents can be sent to firstname.lastname@example.org or email@example.com. Members can also send the abovementioned documents to M/s. KFin Technologies Private Limited at Selenium Building, Tower-B, Plot No 31 & 32, Financial District, Nanakramguda, Serilingampally, Hyderabad – 500 032.