{"id":7386,"date":"2025-07-03T12:02:20","date_gmt":"2025-07-03T12:02:20","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/?post_type=glossary&#038;p=7386"},"modified":"2025-07-03T12:02:24","modified_gmt":"2025-07-03T12:02:24","slug":"section-194-of-income-tax-act","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/section-194-of-income-tax-act\/","title":{"rendered":"Section 194 of Income Tax Act"},"content":{"rendered":"<p>If you&#x2019;re a shareholder in India receiving <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/dividend\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">dividend<\/a>s from a company, it&rsquo;s essential to understand how <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tax\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>Tax<\/a> Deducted at Source (<a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/tds\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>TDS<\/a>) applies under Section 194 of the <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/income-tax-act\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Income Tax Act<\/a>. Let&#x2019;s break it down in straightforward terms.<\/p>\n\n\n\n<h3 id=\"what-is-section-194\" class=\"wp-block-heading\">What is Section 194?<\/h3>\n\n\n\n<p>Section 194 mandates that Indian companies must deduct TDS when paying dividends to resident <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/shareholders\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">shareholders<\/a>. This means a portion of your dividend is withheld by the company and paid to the government as tax on your behalf.<\/p>\n\n\n\n<h3 id=\"when-is-tds-deducted-on-dividends\" class=\"wp-block-heading\">When is TDS Deducted on Dividends?<\/h3>\n\n\n\n<p>TDS is deducted when:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The dividend is credited to your account, or<\/li>\n\n\n\n<li>The dividend is actually paid to you,<\/li>\n<\/ul>\n\n\n\n<p>whichever occurs first.<\/p>\n\n\n\n<h3 id=\"tds-rates-and-thresholds\" class=\"wp-block-heading\">TDS Rates and Thresholds<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Standard TDS Rate<\/strong>: 10% if the total dividend exceeds &#x20B9;5,000 in a financial year.<\/li>\n\n\n\n<li><strong>Higher TDS Rate<\/strong>: 20% if you haven&#x2019;t provided your PAN to the company.<\/li>\n<\/ul>\n\n\n\n<p><em>Note<\/em>: As per recent updates, the threshold for TDS deduction has been increased to &#x20B9;10,000. <\/p>\n\n\n\n<h3 id=\"exemptions-from-tds\" class=\"wp-block-heading\">Exemptions from TDS<\/h3>\n\n\n\n<p>TDS is <strong>not<\/strong> deducted if:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Your total dividend income in a financial year is &#x20B9;5,000 or less.<\/li>\n\n\n\n<li>You submit <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/form-15g\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Form 15G<\/a> (for individuals below 60 years) or <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/form-15h\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Form 15H<\/a> (for senior citizens) declaring that your income is below the taxable limit.<\/li>\n\n\n\n<li>The dividend is paid to certain entities like:\n<ul class=\"wp-block-list\">\n<li>Life Insurance Corporation of India (LIC)<\/li>\n\n\n\n<li>General Insurance Corporation (GIC)<\/li>\n\n\n\n<li>Other insurers with full beneficial interest in the <a class=\"glossaryLink\"  href=\"https:\/\/lemonn.co.in\/blog\/glossary\/shares\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'  tabindex='0' role='link'>shares<\/a>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h3 id=\"due-dates-for-tds-deposit\" class=\"wp-block-heading\">Due Dates for TDS Deposit<\/h3>\n\n\n\n<p>Companies must deposit the deducted TDS to the government:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>For April to February<\/strong>: By the 7th of the following month.<\/li>\n\n\n\n<li><strong>For March<\/strong>: By April 30th.<\/li>\n<\/ul>\n\n\n\n<h3 id=\"claiming-tds-in-your-tax-return\" class=\"wp-block-heading\">Claiming TDS in Your Tax Return<\/h3>\n\n\n\n<p>The TDS deducted will reflect in your <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/form-26as\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">Form 26AS<\/a>. You can claim this amount as a credit when filing your <a class=\"glossaryLink\" href=\"https:\/\/lemonn.co.in\/blog\/glossary\/income-tax\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]' tabindex=\"0\" role=\"link\">income tax<\/a> return, reducing your overall tax liability.<\/p>\n\n\n\n<h3 id=\"key-takeaways\" class=\"wp-block-heading\">Key Takeaways<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>TDS on dividends<\/strong> ensures tax is collected at the source.<\/li>\n\n\n\n<li><strong>Providing your PAN<\/strong> to the company is crucial to avoid higher TDS rates.<\/li>\n\n\n\n<li><strong>Submitting Form 15G\/15H<\/strong> can help avoid TDS if your income is below the taxable limit.<\/li>\n\n\n\n<li><strong>Always check your Form 26AS<\/strong> to ensure TDS credits are accurately reflected.<\/li>\n<\/ul>\n\n\n\n<p>Understanding these provisions helps in effective tax planning and ensures compliance with tax laws.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you&#x2019;re a shareholder in India receiving dividends from a company, it&#x2019;s essential to understand how Tax Deducted at Source (TDS) applies under Section 194 of the Income Tax Act. Let&#x2019;s break it down in straightforward terms. What is Section 194? Section 194 mandates that Indian companies must deduct TDS when paying dividends to resident [&#x2026;]<\/p>\n","protected":false},"author":9,"featured_media":0,"menu_order":0,"template":"","meta":{"footnotes":""},"class_list":["post-7386","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7386","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/9"}],"version-history":[{"count":1,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7386\/revisions"}],"predecessor-version":[{"id":7398,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/7386\/revisions\/7398"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=7386"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}