Why is the dividend amount received lesser than what it should be?

Dividends are a portion of a company's profits distributed to shareholders as a reward for their investment. When a company declares a dividend, shareholders expect to receive that exact amount multiplied by the number of shares they own. However, the actual amount credited to the account is often less due to tax deductions.

In India, companies must deduct tax at source before paying dividends to shareholders. This Tax Deducted at Source (TDS) amount is then deposited with the government as an advance tax payment on your behalf.

The table below shows the TDS deductions for resident Indians, NRIs and non-individual (corporate, Trusts, LLP, etc.) account holders:

Example scenario

• Resident with PAN (Dividend below threshold)
  • Shares owned: 100
  • Dividend declared: ₹50 per share
  • Total dividend: ₹5,000
  • TDS deducted: ₹0 (below ₹10,000 threshold)
  • Amount received: ₹5,000
• Resident with PAN (Dividend above threshold)
  • Shares owned: 500
  • Dividend declared: ₹30 per share
  • Total dividend: ₹15,000
  • TDS deducted: ₹1,500 (10% of ₹15,000)
  • Amount received: ₹13,500
• Resident without PAN (Dividend above threshold)
  • Shares owned: 500
    
  • Dividend declared: ₹30 per share
  • Total dividend: ₹15,000
  • TDS deducted: ₹3,000 (20% of ₹15,000 due to no PAN)
  • Amount received: ₹12,000
• NRI investor
  • Shares owned: 100
  • Dividend declared: ₹30 per share
    
  • Total dividend: ₹3,000
  • TDS deducted: ₹600 (20% of ₹3,000)
  • Amount received: ₹2,400

Did You Know?

• The TDS paid on dividends is part of the tax paid for the financial year. This can be verified in Form 26AS, available on the income tax portal. To learn more about Form 26AS, visit contents.tdscpc.gov.in/en/form26AS-introduction.
• Senior citizens or individuals whose total income is below the taxable limit can submit Form 15G / 15H to avoid a TDS deduction.
• When filing your income tax return, you can claim credit for TDS deducted on dividends.