How To Avoid TDS On Dividend: At the time of many types of payment, a fixed part of the entire amount is deducted as TDS. Payment of earnings in the form of dividend from the shares of a company is also included in these. Whenever a company pays dividend to its shareholders, TDS is already deducted from it. Although it can be saved.
The system is not very old
The system of TDS on dividend income is not very old. For this provision has been made under section 194 of the Income Tax Act. The system of deducting TDS on dividend has come into effect from April 01, 2020 i.e. from the financial year 2020-21. Since then, every year the shareholders of all dividend paying companies pay a part of their earnings as TDS. Today we are going to tell you some such measures, by adopting which you can reduce this deduction. If more than Rs 5000 is being earned from dividend, then TDS will be deducted at the rate of 10%. However, if your total earnings including dividends are below the exemption limit, you can submit Form 15G/15H, after which TDS will not be deducted on your earnings.
Measures for Mutual Fund Investors
< p>Investors of mutual funds have other ways to save TDS. Such investors can avail the SWP facility to convert the income from mutual fund schemes into dividends to save TDS. The SWP facility is a way of withdrawing money from a mutual fund scheme and all such withdrawals include capital gains in addition to the principal amount. In such cases, investors have to pay short term or long term capital gains tax depending on the period.
You can also choose this route
Another way to avoid TDS is that Instead of dividend paying stocks and mutual funds, focus on growth options. In such cases, instead of returning the profits made on the principal amount in the form of dividends, companies or mutual funds invest it back in the business. Hence TDS is not levied in such cases.
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