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

Mr. Sunil Verma, a resident individual, receives a dividend of Rs 40,000 from an Indian listed company. Under the current provisions, how is this dividend taxed in his hands?

Dividend received 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 company-level dividend distribution tax with exemption for shareholders no longer applies.

  1. AExempt in full under section 10(34)
  2. BTaxed at 10% as a special rate regardless of slab
  3. CTaxed at his applicable slab rate as income from other sourcesCorrect
  4. DTaxed as capital gains at 12.5%

Explanation

Dividend distribution tax was abolished, so dividends are taxable in the shareholder's hands. They fall under income from other sources and are taxed at the individual's slab rate. The exemption and flat-rate options reflect earlier regimes or a wrong head of income.

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