Explanation
Section 115O imposed Dividend Distribution Tax (DDT) on companies distributing dividends to shareholders. Until 31 March 2020, the effective DDT rate including surcharge and cess was approximately 20.56%, and dividends received by shareholders were fully exempt under §10(34). The Finance Act 2020 abolished DDT with effect from 1 April 2020 (FY 2020-21 onwards). From FY 2020-21, dividends are taxable in the hands of shareholders as 'Income from Other Sources' at normal slab rates. Companies must deduct TDS at 10% under §194 when dividend paid to a resident exceeds ₹5,000 in a financial year. For non-resident shareholders, TDS is deducted under §195 or the applicable DTAA rate (often 10–15%). Shareholders can claim credit for the TDS in their ITR. Interim dividends, final dividends, and deemed dividends under §2(22)(e) are all now taxable at slab rates. Companies no longer file DDT returns; the compliance burden has shifted to shareholders. Verify on the income-tax portal before filing.