TDS on Dividend in 2026: Rates, the ₹10,000 Limit, Form 121 and NRIs

Since dividends became taxable in shareholders' hands in 2020, every Indian company that pays one has had to deduct tax first. That reaches retired investors with a few blue-chip shares, family-owned private companies paying their promoters, small listed firms, NRIs holding Indian stocks and mutual fund investors on the payout option. This guide is for shareholders who want to know why their dividend arrived short and how to stop it when they owe no tax, and for small companies that must deduct. It covers the 10% rate, the ₹10,000 limit, Form 121, NRI and treaty rates, and the 2026 changes, with worked examples in rupees.

Quick answer

TDS on dividend is 10% on dividends an Indian company pays to resident shareholders, under section 393(1) Table Sl. No. 7 of the Income-tax Act, 2025 (old section 194). Resident individuals suffer no TDS if one company's dividends to them in the tax year total ₹10,000 or less and are not paid in cash. Others — HUFs, firms, companies — face TDS from the first rupee. Non-residents: 20% plus surcharge and cess, or the treaty rate.

• No valid PAN, or PAN not linked to Aadhaar: 20%

• Nil tax for the year? Give Form 121 (replaced 15G/15H) to the registrar before the record date

• Mutual fund payouts: 10% above ₹10,000 a year (old 194K)

• Certificate: Form 131 (old 16A) each quarter; check your AIS

How dividends are taxed in 2026

Until 31 March 2020 companies paid dividend distribution tax and shareholders received dividends tax-free. The Finance Act 2020 reversed that: dividends are now income of the shareholder, taxed at their normal slab rate under the head "Income from other sources", and the company deducts tax when it pays. The Income-tax Act, 2025, which took effect on 1 April 2026, kept the same structure and moved the TDS rule from section 194 into row 7 of the table in section 393(1).

Two changes made by the Finance Act 2026 affect investors this year. First, interest on money borrowed to buy shares can no longer be deducted from dividend income; the old Act allowed up to 20% of the dividend, but section 93(2) was amended to allow no deduction from 1 April 2026. Second, from 1 April 2026 the amount a company pays to buy back its shares is taxed as capital gains, not as a dividend, so a buyback no longer triggers dividend TDS for resident shareholders. Buybacks between 1 October 2024 and 31 March 2026 were treated as dividends and suffered TDS.

Will TDS be deducted from your dividend?

Step 1

Paid by an Indian company?

Step 2

Foreign company → no Indian TDS

Step 3

Are you a non-resident? → s.393(2), 20% or treaty rate

Step 4

Resident individual: total from this company ≤ ₹10,000?

Yes → no TDS

Step 5

Form 121 or certificate filed?

No → 10%

Only dividends from Indian (domestic) companies carry TDS. The payer column of row 7 says "any domestic company". Dividends from a foreign company — shares of a US company held through an overseas brokerage account, for instance — arrive without Indian TDS, though the foreign country may withhold its own tax. You report them in your return and claim credit for the foreign tax under the treaty.

Rates and the ₹10,000 limit

The rate for resident shareholders is a flat 10%. The table gives a threshold of nil, so the starting point is that every rupee of dividend suffers TDS. The relief comes from section 393(4) Table Sl. No. 10, which lists cases where no tax is deducted. Clause (f) covers a shareholder who is an individual, where the dividend is paid by any mode other than cash and the amount or aggregate paid or likely to be paid during the tax year does not exceed ₹10,000.

Three features of that wording matter. The limit is per company: a person with shares in fifteen companies can receive up to ₹10,000 from each without TDS. It is an annual aggregate, so the interim and final dividends from the same company in the same tax year are added together. And it applies only to individuals. An HUF, a partnership firm, an LLP, a trust or a company holding shares suffers 10% on every rupee, unless it falls in an exempt category or holds a certificate. The limit was raised from ₹5,000 to ₹10,000 from 1 April 2025 by the Finance Act 2025.

Some holders are outside the rule entirely. Section 393(4) Table Sl. No. 10 lists LIC, GIC and the public sector general insurers, any other insurer for shares it owns, business trusts receiving dividends from their special purpose vehicles, and persons notified by the government. Section 393(5) separately exempts dividends paid to mutual funds. Companies usually ask these holders for a self-declaration and registration certificate before the record date, and pension and provident funds whose income is exempt are typically handled the same way.

Dividend TDS at a glance (2026-27)

10%

Resident shareholders

with valid PAN

₹10,000

Limit for individuals

per company, per tax year

20%

Non-residents

plus surcharge and cess, or treaty rate

20%

No valid PAN

including PAN not linked to Aadhaar

Who deducts and when

The duty sits with the company declaring the dividend, and in practice with its registrar and transfer agent (RTA), which maintains the register of members and processes the payout. The note under row 7 says the tax must be deducted before any distribution or payment of dividend. Listed companies fix a record date, work out each holder's entitlement from the depository data, apply the rate for that holder's category and PAN status, and pay the net amount to the bank account linked to the demat account.

That is why the details held by your depository participant matter more than anything you tell the company later. If your PAN is not recorded, or your PAN is inoperative because it was not linked with Aadhaar, the RTA's system will apply 20%. If your residential status in the demat account still shows "resident" years after you moved abroad, you will get the resident rate — and a problem later, because an NRI must be taxed under a different provision.

Small private companies paying dividends to a handful of shareholders do the same work themselves. They need a TAN, must deduct before paying, deposit the tax by the 7th of the next month (30 April for March), report it in the quarterly statement and issue certificates. A family company paying its promoter-directors a large dividend before 31 March is a common case where TDS gets forgotten, and the interest runs from the date of payment.

Before the record date

0/6

• PAN recorded in your demat account and linked with Aadhaar
• Residential status in the demat and bank accounts is correct
• Bank account for dividend credit updated
• Form 121 uploaded to each company's RTA, if you qualify
• Form 128 certificate shared with payers, if you hold one
• NRIs: tax residency certificate, Form 41 and no-PE declaration sent before the company's cut-off

Share Print

Form 121: stopping TDS when your tax is nil

Section 393(6) lets a resident individual give the payer a written declaration that the tax on their estimated total income for the year will be nil, and dividends under row 7 are on the list of incomes it covers. From 1 April 2026 the declaration is Form 121, prescribed by rule 211 of the Income-tax Rules, 2026. It replaced both Form 15G, which younger investors used, and Form 15H, which senior citizens used.

There is an important condition. The Note to section 393(6) says the declaration cannot be used by a person other than a resident individual aged 60 or more if the aggregate of the incomes covered by it — dividends, interest and similar items — exceeds the maximum amount not chargeable to tax, which is ₹4 lakh under the new regime. So an investor under 60 with ₹5 lakh of dividends cannot file Form 121 even if the rebate on income up to ₹12 lakh brings their tax to nil. Seniors face only the nil-tax test.

Give a separate Form 121 to each company's RTA before the record date of each dividend. Most RTAs publish an upload link and an email address in the dividend communication sent to shareholders in April to June, and they reject forms that are incomplete or arrive late. The payer allots each declaration a unique number, quotes it in its quarterly statement and forwards copies to the Department. From 1 April 2027 the Finance Act 2026 lets holders of listed securities file one declaration with their depository instead, which will pass it to every company and fund that pays them.

A false declaration is an offence, and the dividend appears in your Annual Information Statement in any case because the company reports it even when no tax is deducted. If your tax is low but not nil, the right route is a lower deduction certificate in Form 128 under section 395(1). Our lower TDS certificate guide explains how to apply on TRACES; a certificate binds every payer named in it.

Dividends paid to NRIs and foreign investors

Dividends to non-residents fall under section 393(2). For a non-resident individual or foreign company, Table Sl. No. 17 applies at the rates in force, and Part II of the First Schedule to the Finance Act 2026 sets the rate on dividends at 20%. Surcharge is added at 10% where the payment exceeds ₹50 lakh and 15% above ₹1 crore — capped at 15% for dividends — followed by 4% health and education cess. For most NRIs, whose dividends are far below ₹50 lakh, the effective rate is 20.8%. Foreign portfolio investors are covered by Sl. No. 15 at 20%.

Section 159 lets a non-resident use the tax treaty between India and their country of residence if it is more favourable, and many treaties cap tax on dividends below 20%. To get the treaty rate at source, the shareholder must give the company a tax residency certificate from their home country, Form 41 (which replaced Form 10F) filed electronically on the e-filing portal, a declaration that they have no permanent establishment in India, and their PAN or, failing that, their foreign tax number and address. Companies are not obliged to accept incomplete papers and set their own cut-off before the record date. A non-resident who declares a permanent establishment in India loses the treaty dividend rate; listed companies' 2026 notices apply 35% plus surcharge and cess in that case.

The company reports non-resident deductions in Form 144 (old Form 27Q) and issues Form 131 certificates. If more tax was deducted than the treaty allows, the NRI's remedy is to file an Indian return and claim a refund; the company cannot refund it. NRIs who keep their bank and demat records up to date with their non-resident status avoid the mismatch where an RTA deducts 10% as if they were resident and the Department later treats the deduction as short.

Resident shareholder vs NRI shareholder

Point	Resident individual	Non-resident individual
Provision	s.393(1) Table Sl. 7 (old 194)	s.393(2) Table Sl. 17 (old 195)
Rate	10%	20% + surcharge + 4% cess, or treaty rate
Threshold	₹10,000 a year per company	None
Stop or reduce TDS	Form 121 (nil tax) or Form 128 certificate	Treaty documents (TRC, Form 41, no-PE) or Form 128 certificate
Company's statement	Form 140 (old 26Q)	Form 144 (old 27Q)
Certificate	Form 131 (old 16A)	Form 131 (old 16A)

Provision

Resident individual

s.393(1) Table Sl. 7 (old 194)

Non-resident individual

s.393(2) Table Sl. 17 (old 195)

Rate

Resident individual

10%

Non-resident individual

20% + surcharge + 4% cess, or treaty rate

Threshold

Resident individual

₹10,000 a year per company

Non-resident individual

None

Stop or reduce TDS

Resident individual

Form 121 (nil tax) or Form 128 certificate

Non-resident individual

Treaty documents (TRC, Form 41, no-PE) or Form 128 certificate

Company's statement

Resident individual

Form 140 (old 26Q)

Non-resident individual

Form 144 (old 27Q)

Certificate

Resident individual

Form 131 (old 16A)

Non-resident individual

Form 131 (old 16A)

Worked examples in ₹

1. Two companies, one investor. Meera, 45, a resident with a valid PAN, receives ₹8,000 from Company A and ₹14,000 from Company B in 2026-27, both by bank transfer. Company A's total is within ₹10,000, so it deducts nothing. Company B's total exceeds the limit, so it deducts 10% on the whole ₹14,000 — ₹1,400 — and Meera receives ₹12,600.

2. An HUF shareholder. The Sharma HUF receives a ₹6,000 dividend. The ₹10,000 relief is only for individuals, so the company deducts ₹600.

3. A retired investor with Form 121. Mr Iyer, 68, has a pension of ₹4 lakh and dividends of ₹1.8 lakh. Under the new regime his total income of ₹5.8 lakh is below ₹12 lakh, so his tax after rebate is nil. As a senior he can file Form 121 with each company's RTA before the record dates, and no TDS is deducted.

4. The under-60 trap. Kavya, 34, left her job and lives on dividends of ₹5 lakh a year. Her tax is nil after the rebate, but her dividend income exceeds ₹4 lakh, so the Note to section 393(6) bars her from filing Form 121. Her companies deduct ₹50,000 in total, which she recovers as a refund in her return. A Form 128 certificate would have prevented the deduction.

5. An NRI shareholder. Rohan, resident in the UAE, receives ₹50,000 of dividends from an Indian company. Without treaty documents the company deducts 20% plus 4% cess — 20.8%, or ₹10,400. If he supplies a tax residency certificate, Form 41 and a no-PE declaration, and the treaty rate is, say, 10%, the deduction drops to ₹5,000.

6. PAN not linked to Aadhaar. In example 1, if Meera's PAN had become inoperative, Company B would deduct 20% on ₹14,000 — ₹2,800. A Form 121 given with an invalid PAN is itself invalid.

7. Mutual fund payout. A fund pays ₹12,000 of IDCW distributions to a resident investor in the year. That exceeds ₹10,000, so the fund deducts 10% — ₹1,200 — under Table Sl. No. 4(i).

Check the TDS on a paymentWork out TDS and the net amount on any payment — free, no login.

Deposit, statements and certificates

Tax deducted from a dividend is deposited by the 7th of the next month of the following month under the company's TAN, or by 30 April for deductions in March. Deductions from residents go in the quarterly Form 140 (formerly Form 26Q), due on 31 July, 31 October, 31 January and 31 May; non-resident deductions go in Form 144. Payments covered by a Form 121 declaration must still be reported, with the declaration's number, even though no tax was deducted.

Shareholders receive a Form 131 certificate, the successor to Form 16A, downloaded by the company from TRACES and issued within 15 days from the due date of the quarterly statement. Many listed companies email it or put it on the RTA's website. You do not need the certificate to claim the credit: the deduction appears against your PAN in the Annual Information Statement, and your return pre-fills it. Check the AIS before filing, and if a dividend is missing or shows the wrong PAN, contact the company's RTA, which can correct the statement on TRACES. Our Form 16A and Form 131 guide explains the certificate in detail.

Common mistakes and how to fix them

Filing Form 121 after the record date. RTAs work out TDS on the record date. A late form will not reverse a deduction already made; claim the refund in your return and file on time for the next dividend.

Using Form 121 when you are under 60 and above the limit. If your dividend and interest income exceeds ₹4 lakh, the declaration is not available to you even when your final tax is nil. Apply for a Form 128 certificate instead.

Leaving the PAN inoperative. A PAN not linked with Aadhaar is treated as inoperative and doubles the deduction to 20%. Link it on the e-filing portal well before the record date.

NRIs still marked as residents. Update the residential status in your demat and bank accounts when you move abroad. Being taxed at 10% as a resident is not a saving; the Department can treat the shortfall as your tax to pay with interest.

Small companies forgetting to deduct. A private company paying a year-end dividend to its promoters must deduct before payment. Late deduction carries interest of 1% a month or part of a month a month, and depositing late carries 1.5% a month or part of a month. See our guide to TDS interest and penalties.

How dividend TDS has changed

1 April 2020

Dividend distribution tax abolished; TDS on dividends reintroduced at 10% above ₹5,000

1 October 2024

Buyback proceeds treated as dividends in shareholders' hands

1 April 2025

Limit for individuals raised from ₹5,000 to ₹10,000

1 April 2026

Income-tax Act, 2025: s.393(1) Sl. 7; Form 121 replaces 15G/15H; buybacks move to capital gains

1 April 2027

Form 121 can be filed once with the depository for listed securities

What changed under the Income-tax Act, 2025

The dividend rule moved from section 194 to section 393(1) Table Sl. No. 7, the individual exemption moved to section 393(4) Table Sl. No. 10(f), and non-resident dividends moved from section 195 to section 393(2). The Income Tax Department's transition FAQs confirm that rates and thresholds were carried over unchanged. What changed for investors is the paperwork: Form 121 instead of Forms 15G and 15H, Form 131 instead of Form 16A, Form 41 instead of Form 10F, and Forms 140 and 144 for the company's statements.

The transition rule looks at the earlier of credit or payment. A final dividend for 2025-26 declared at an AGM in mid-2026 and paid after 1 April 2026 falls under the new Act, so companies collected Form 121, not 15G or 15H, for it. An interim dividend paid in March 2026 stayed under the 1961 Act and was reported in Form 26Q with a Form 16A certificate.

Official links

• Income-tax Act, 2025 — Gazette texts.393(1) Sl. 7 and 4(i); s.393(4) Sl. 10; s.393(2); s.393(6)
• Finance Bill, 2026First Schedule Part II — rates for non-residents
• Memorandum to Finance Bill 2026Buyback, interest deduction, depository declarations
• TDS compliance helpTransition rule
• e-Filing portalAIS, Form 41, PAN-Aadhaar link, returns
• TRACESForm 131 certificates; Form 128 applications

What to do next

Before the next record date, check that your demat account shows the right PAN, residential status and bank account, and decide whether you qualify for Form 121 or need a Form 128 certificate. Companies paying dividends can work out each deduction with our free TDS calculator. For the full picture of deductions on investment income, see TDS on interest and what TDS is and how it works.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the TDS rate on dividend in 2026?

An Indian company deducts 10% from dividends paid to resident shareholders who have a valid PAN, under section 393(1) Table Sl. No. 7 of the Income-tax Act, 2025 (old section 194). Without a valid PAN the rate is 20%. Dividends to non-residents are taxed at 20% plus surcharge and cess, or a lower treaty rate if the shareholder supplies the documents.

Is there TDS on dividend up to ₹10,000?

Not for a resident individual. If the dividend one company pays you during the tax year, by any mode other than cash, does not exceed ₹10,000 in total, no TDS is deducted. The limit is per company, so you can receive more than that in total across several companies without TDS. It does not help HUFs, firms or companies, which suffer TDS from the first rupee.

Can I submit Form 15G or 15H for dividend now?

From 1 April 2026 Forms 15G and 15H are replaced by a single declaration, Form 121, under section 393(6) of the Income-tax Act, 2025. A resident individual whose tax for the year will be nil can give it to the company's registrar before the record date. Under-60s cannot use it if their dividend and similar income exceeds the basic exemption limit; seniors can, if their tax is nil.

How much TDS is deducted on dividend for NRIs?

The rate in force is 20%, plus surcharge where applicable and 4% cess, under section 393(2). If the NRI's country has a tax treaty with India with a lower dividend rate, the company can apply it once the shareholder gives a tax residency certificate, Form 41 (old Form 10F) filed online, a no-permanent-establishment declaration and their PAN.

Is TDS deducted on mutual fund dividends?

Yes. Income distributed by mutual funds (the IDCW option) is covered by a separate row, section 393(1) Table Sl. No. 4(i), the successor to section 194K. The fund deducts 10% once distributions to a resident in the tax year exceed ₹10,000. Form 121 works for these payouts too.

Is a share buyback still treated as a dividend?

Not from tax year 2026-27. The Finance Act 2026 moved buyback proceeds out of dividend income and into capital gains from 1 April 2026, so the company no longer deducts dividend TDS on a buyback for resident shareholders. Promoters face a higher effective tax on buyback gains. Buybacks between 1 October 2024 and 31 March 2026 were taxed as dividends.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 12 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.The Income-tax Act, 2025 (Act No. 30 of 2025), Gazette of India Extraordinary, 21 August 2025 — Ministry of Law and Justice (Legislative Department) · accessed 12 October 2026
2. 2.Finance Bill, 2026 — First Schedule, Part II (rates for deduction of tax at source) — Ministry of Finance (Union Budget 2026-27) · accessed 12 October 2026
3. 3.Memorandum explaining the provisions in the Finance Bill, 2026 — Ministry of Finance (Union Budget 2026-27) · accessed 12 October 2026
4. 4.Memorandum explaining the provisions in the Finance Bill, 2025 — Ministry of Finance (Union Budget 2025-26) · accessed 12 October 2026
5. 5.TDS Compliance — e-Filing help (FAQs on the transition to the Income-tax Act, 2025) — Income Tax Department (e-Filing portal) · accessed 12 October 2026
6. 6.Communication on tax deduction at source on dividend, May 2026 — Tata Communications Limited · accessed 12 October 2026
7. 7.Form 121 — declaration for no TDS — ClearTax · accessed 12 October 2026