Explanation
Until 31 March 2020, companies paid Dividend Distribution Tax (DDT) under Section 115O at 20.56% on declared dividends — dividends were then tax-free in the hands of shareholders. Finance Act 2020 abolished DDT from 1 April 2020. From 1 April 2020: (1) Companies declare and pay dividends without DDT. (2) The company deducts TDS at 10% under §194 before paying dividend to shareholders if dividend to a resident shareholder exceeds ₹5,000 per year per company. (3) Shareholders include the full dividend in their income and pay tax at applicable slab rates (old regime) or new regime rates. (4) TDS credit is available against total tax liability. (5) Foreign companies/non-resident shareholders: TDS at 20% or DTAA rate. Under IT Act 2025, §115O is omitted (abolished); §393 consolidates §194 TDS on dividends. Verify on the income-tax portal before filing.