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

Which statement about dividend income received by a resident individual from an Indian company is correct under the current law?

Dividend from an Indian company is taxable in the shareholder's hands at applicable slab rates, under Income from Other Sources. The earlier regime of dividend distribution tax paid by the company has been withdrawn, so dividends are neither exempt nor capital gains.

  1. AIt is taxable in the hands of the shareholder at applicable slab ratesCorrect
  2. BIt is fully exempt in the hands of the shareholder
  3. CIt is taxed only as long-term capital gain at 12.5%
  4. DIt is taxed at a flat 10% with no deductions

Explanation

Dividends are taxed in the hands of the shareholder under Income from Other Sources at slab rates. They are not exempt and are not treated as capital gains. The company no longer pays dividend distribution tax.

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