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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Income from Other Sources

Ms. Kavita Rao, a resident individual, received Rs 1,20,000 as dividend from an Indian company during the year. She is in the 30% slab (ignore surcharge and cess). Which statement about the taxation of this dividend is correct?

The dividend is taxed at her 30% slab rate under Income from Other Sources. Since dividend distribution tax was abolished, dividends are taxed in the shareholder's hands. It is not exempt, not subject to a flat 10%, and not a capital gain.

  1. AIt is fully exempt in her hands under Section 10
  2. BIt is taxable at a flat 10% only
  3. CIt is taxable at her slab rate of 30% under Income from Other SourcesCorrect
  4. DIt is taxable as long-term capital gain

Explanation

Since the abolition of dividend distribution tax, dividends are taxed in the hands of the shareholder as Income from Other Sources at the applicable slab rate. For Ms. Rao, tax is 30% of Rs 1,20,000 = Rs 36,000, ignoring surcharge and cess. It is neither exempt nor a capital gain.

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