National Stock Exchange of India Limited (NSE)
Bombay Stock Exchange Limited (BSE)
Trading symbol at NSE - NIITLTD
Trading symbol at BSE - 500304
ISIN at NSDL/CDSL - INE161A01038
Finance Act 2020 has introduced the new tax regime for taxing the dividend income in the hands of shareholders. Prior to April 01, 2020, dividend distribution was subject to Dividend distribution tax (DDT) in the hands of the company and such dividend income was exempted in the hands of shareholders.
However w.e.f. April 01, 2020, DDT has been abolished and Dividend income is now taxable in the hands of the shareholders, which needs to be deducted by the company at the time of payment of dividend. Taxability of the dividend shall depend upon class of the shareholder(s), quantum of dividend and country of their residence.
The objective of this FAQ is to bring clarity on the possible concerns of the shareholders.
Note: This FAQ shall not be construed as a legal advice and the shareholders should consult their advisors for any further clarity.
In view of specific provision under section 196D of the Income Tax Act 1961, WHT shall be deducted @ 20% (plus applicable Surcharge and Cess) on dividend paid to Foreign Institutional Investors (“FIIs”) /Foreign Portfolio Investors (“FPIs”). Rates of WHT/TDS including surcharge and cess are tabulated given below:
FII/ FPI making investment under FPI route) in form of trusts/AOP
FII/ FPI (making investment under FPI route) in form of Company
FII/ FPI (making investment under FPI route) in form of Firm
a. Tax Residency Certificate (TRC) for FY 2020-21. TRC can be obtained from the Revenue / Tax authorities of the country of which the shareholder is resident.
b. Form 10F as per the format specified under Income Tax Act, 1961 available at https://www.incometaxindia.gov.in/forms/income-tax%20rules/103120000000007197.pdf
c. Copy of PAN Card, if available; In absence of PAN, the following information/ document is mandatory: in respect of the non-resident shareholder: i) Name, e-mail id, contact number; ii) Address in the country of residence; iii) Tax Residency Certificate (TRC), if the law of country of residence provides for such certificate; and iv) Tax Identification Number (TIN) in the country of residence. Where TIN is not available, a unique identification number is required to be furnished through which the deductee is identified in the country of residence.
d. Self-declaration inter-alia of beneficial ownership, not having a PE in India, etc.
Please note that the Company is not obligated to apply the beneficial treaty rates at the time of tax deduction of TDS on dividend. Application of beneficial treaty rate shall depend upon the completeness and satisfactory review by the Company, of the documents submitted by the non- resident shareholder.
If the documents are not provided or are not complete in order to provide the beneficial treaty rates, then tax will be deducted at 20% plus applicable surcharge and cess.
Rates of TDS (for non-resident individuals, HUF, AOP, BOI) including surcharge and cess are tabulated given below:
Rates of TDS for non-resident companies including surcharge and cess are tabulated given below:
Non-residents who have obtained a certificate under section 197 of the Income-Tax Act: TDS would be done as per the lower or NIL rate that may be mentioned in the certificate under section 197 of the Act. The certificate furnished to the Company should specifically mention the nature of income as dividend, amount expected and the payer as NIIT Limited.
If you have obtained lower/NIL deduction certificate under section 197 from Income Tax department kindly share copy of the same with us latest by September 10, 2020 to apply lower/NIL TDS rate as mentioned in such certificate.
In case of any other query (if any), Please write us at email@example.com ; NIITDIVTDS@niit.com
Effective April 01, 2020, Dividend is taxable in the hands of shareholders and therefore TDS will also be deducted as per the provisions in the Income-Tax Act, 1961.
TDS will be deducted @7.5%* of dividend paid during the FY 2020-21. However, where the dividend payout does not exceed Rs. 5,000 in case of resident individuals, no TDS shall be deducted. For all other categories of shareholders (including individuals deriving dividend in excess of Rs. 5,000), availability of Permanent Account Number (PAN) with the depository/ Transfer Agent is mandatory, else tax rate of 20% would be applied. Accordingly, shareholders are advised to immediately update their Permanent Account Number (PAN) with the depository/ Transfer Agent.
* The TDS rate prescribed in the Income-Tax act, 1961 is 10%. however, the TDS rates applicable on payments to residents were reduced by 25% i.e. to 7.5% owning to the Covid-19 pandemic by way of a CBDT press release dated May 13, 2020. please note, reduced TDS, as announced by Finance Minister, is applicable till March 31, 2021 to the resident shareholder.
For resident shareholders, the rate of TDS would not be increased by surcharge and cess. For non-resident shareholders, the rate of TDS would be increased by applicable surcharge and cess where relevant Tax Treaty benefit is not available.
Yes, if the dividend distributed to a resident individual shareholder does not exceed Rs 5,000 in a financial year, then no tax will be deducted. However, no such threshold is applicable for payment to shareholders other than an individual.
Yes, in case you are resident Individual/ HUF shareholder and your total income is not exceeding the income chargeable to tax in India as per Income Tax Act, 1961, then you can submit Form 15G/15H immediately to the Company along with copy of self-attested PAN card. Please note Form 15G/H if applicable is to be filed every Financial Year preferably in the month of April (beginning of the FY). Please ensure that your correct PAN card details are already updated in your demat account /physical folio as the case may be before applying so.
If the shares are held in Demat form, the PAN needs to be updated with the Depository.
If the shares are held in physical form, the PAN needs to be updated with the Company’s Registrar and Transfer Agents - M/s Alankit Assignments Limited, Alankit House, 4E/2, Jhandewalan Extension, New Delhi -110 055
If the PAN is already updated, no further action is required
Please refer quest. No. 11 for sending documents.
Yes, there are following entities which are exempt from TDS on dividend
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