Taxation on Dividend Income (India)

Since April 2020 (FY 2020–21 onwards), dividends received by shareholders are fully taxable in the hands of the investor.

Dividend from Indian Companies

• Taxed under Income from Other Sources (IFOS).
• Taxed at your applicable income tax slab rate.
• TDS @ 10% if annual dividends exceed ₹5,000.
• If PAN not provided → TDS becomes 20%.

Dividend From Mutual Funds

• Treated the same way as company dividend.
• Taxed at slab rate.
• TDS @ 10% if dividend > ₹5,000/year.

Dividend From Foreign Companies

• Fully taxable at slab rate.
• No concessional tax rate.
• If foreign tax is already deducted, you can claim Foreign Tax Credit (FTC) under DTAA rules.

Deductions Allowed

• You can claim interest expense related to borrowing for investments.
• Maximum deduction allowed: 20% of dividend income.

Reporting in ITR

• Report all dividends (including those below ₹5,000) in Schedule OS.
• Report TDS in Schedule TDS-2.

Quick Summary

Source of Dividend	Tax Rate	TDS	Notes
Indian companies	Slab rate	10% above ₹5,000	Add to IFOS
Mutual fund dividends	Slab rate	10% above ₹5,000	Treated like company dividend
Foreign company dividends	Slab rate	No TDS in India	FTC available

Capital-Gains Tax Table for Mutual Funds (India)

Equity Mutual Funds (≥65% Equity)

Category	Holding Period	Tax Type	Tax Rate
Equity Funds	≤ 12 months	STCG	20%
Equity Funds	> 12 months	LTCG	12.5% above ₹1.25 lakh
Equity ETFs	> 12 months	LTCG	12.5% above ₹1.25 lakh

Debt Mutual Funds

Category	Holding Period	Tax Type	Tax Rate
Debt Funds (Bought ≥ Apr 1 2023)	Any period	STCG/LTCG	Slab rate
Debt Funds (Bought ≤ Mar 31 2023)	< 24/36 months	STCG	Slab rate
Debt Funds (Bought ≤ Mar 31 2023)	≥ threshold	LTCG	12.5%

Hybrid Mutual Funds

Category	Holding Period	Tax Type	Tax Rate
Hybrid ≥65% Equity	≤ 12 months	STCG	20%
Hybrid ≥65% Equity	> 12 months	LTCG	12.5%
Hybrid <65% Equity	Any period	STCG/LTCG	Slab rate

Gold Funds / Gold ETFs

Category	Holding Period	Tax Type	Tax Rate
Gold Mutual Funds	≤ 36 months	STCG	Slab rate
Gold Mutual Funds	> 36 months	LTCG	12.5%
Gold ETFs	≤ 12 months	STCG	Slab rate
Gold ETFs	> 12 months	LTCG	12.5%

International Funds / Fund of Funds (FOFs)

Category	Holding Period	Tax Type	Tax Rate
International Funds	Any period	STCG/LTCG	Slab rate
International ETFs	≤ 12 months	STCG	Slab rate
International ETFs	> 12 months	LTCG	12.5%
FOFs	Any period	STCG/LTCG	Slab rate

Securities Transaction Tax (STT)

STT is a direct tax charged on every transaction involving equity shares, equity mutual funds (on sale/redemption), equity derivatives (F&O), and equity-oriented ETFs. It is automatically deducted by your broker.

Purpose of STT

• To prevent tax evasion.
• To simplify taxation in capital markets.
• To replace earlier long and complex transaction taxes.

Key Notes

• STT is not applicable to debt mutual funds, bonds, or commodities.
• STT paid can sometimes be considered while calculating capital gains (only in business income cases).
• It slightly increases your cost of trading but simplifies tax reporting.

STT Rate Table

Instrument / Transaction Type	When STT Is Charged	STT Rate	Who Pays
Equity Shares – Delivery (Buy)	On buying shares	0.1% of transaction value	Buyer
Equity Shares – Delivery (Sell)	On selling shares	0.1% of transaction value	Seller
Equity Intraday (Non-delivery)	Only on selling	0.025% of transaction value	Seller
Equity Futures	On selling futures	0.01% (or 0.02% on some brokers)	Seller
Equity Options – Sell	On selling the option premium	0.1% of premium	Seller
Equity Options – Exercise	When option exercised and delivery happens	0.125% of settlement price	Exerciser
Equity-Oriented Mutual Funds / ETFs	On selling or redeeming	0.00%	Seller
Offer for Sale (OFS)	On transaction value	0.1% – 0.2%	Buyer / Seller
Buyback of Shares	On buyback	0.10%	Company
Equity Derivatives (Index Futures/Options)	Sell side	Same as equity futures/options	Seller