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

Under the Indian Income-tax law currently taught for NISM-Series-X-B, which of the following best describes the nature of tax on dividend received by a resident individual from an equity share of an Indian company?

Dividend from an Indian company is taxable in the shareholder's hands at the individual's applicable slab rate under Income from Other Sources, because dividend distribution tax no longer applies to companies.

  1. AExempt in the hands of the individual up to Rs 10 lakh
  2. BTaxed in the hands of the shareholder at the applicable slab rate under Income from Other SourcesCorrect
  3. CTaxed only at the company level through dividend distribution tax
  4. DTaxed at a flat 10% in the hands of the shareholder

Explanation

Since the abolition of dividend distribution tax, dividends are taxable in the hands of the shareholder. For a resident individual they are added to income and taxed at slab rates under Income from Other Sources. The flat 10% and company-level options describe older or incorrect regimes.

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