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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products

Mr. Arvind Shah, a resident individual, holds listed equity shares of an Indian company. Which statement about the tax treatment of dividend received from that company is correct?

Dividend from an Indian company is taxable in the shareholder's hands at the applicable slab rate under income from other sources. The earlier system of taxing dividend in the company's hands through dividend distribution tax no longer applies.

  1. AIt is taxable in his hands at his applicable slab rate under income from other sourcesCorrect
  2. BIt is fully exempt in his hands under all circumstances
  3. CIt is taxed at a flat 10% only in the company's hands
  4. DIt is taxed as long-term capital gain in his hands

Explanation

Since the abolition of dividend distribution tax, dividends are taxed in the shareholder's hands under income from other sources at slab rates. They are not exempt and are not capital gains.

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