Dividend Tax Calculator India — FY 2025-26

Q: How are dividends taxed in India since DDT abolition?

Since FY 2020-21, Dividend Distribution Tax (DDT) has been abolished. Dividends are now taxable in the hands of the shareholder at their applicable income tax slab rate. This means if you are in the 30% slab, you pay 30% tax (plus surcharge and 4% cess) on all dividend income. Dividends are classified as 'Income from Other Sources' under Section 56(2)(i). This applies to dividends from both Indian companies and mutual funds.

Q: What is the TDS threshold on dividends after Budget 2025?

Budget 2025 raised the TDS threshold on dividends from ₹5,000 to ₹10,000 per company/AMC per financial year, effective 1 April 2025. Under Section 194, companies deduct TDS at 10% only when total dividend paid to a shareholder from that company exceeds ₹10,000 in a FY. This threshold applies per source — you could receive ₹9,000 from 10 companies (₹90,000 total) with zero TDS.

Q: Can I claim any deduction against dividend income?

Under Section 57(i), you can claim a deduction for interest paid on loans taken to acquire the shares or mutual fund units that generated the dividend income. This deduction is capped at 20% of the total dividend income. No other expenses (demat charges, brokerage, advisory fees) are allowed as deductions. Note: Budget 2026 proposes to remove this deduction from FY 2026-27 onwards.

Q: Is the growth option always better than dividend for mutual funds?

For most investors in the 20% or 30% slab, the growth option is more tax-efficient. With dividend (IDCW), each payout is taxed at your slab rate (up to 30%+cess). With growth, equity MF gains above ₹1.25 lakh are taxed at just 12.5% LTCG if held over 12 months. The tax deferral also allows full corpus to compound. However, if you are in the nil or 5% slab, dividend may be acceptable.

Q: How are NRI dividends taxed in India?

For NRIs, TDS on dividends is deducted at 20% under Section 195, plus applicable surcharge and 4% cess. If a DTAA exists between India and the NRI's country offering a lower rate, the NRI can claim it by submitting Form 10F and Tax Residency Certificate. Common DTAA rates: US 25%, UK 15%, Singapore 15%, UAE 10%.

Calculate exact income tax on your dividend income from stocks and mutual funds. Since DDT abolition (FY 2020-21), dividends are taxed at your slab rate. Check TDS applicability per company (₹10,000 threshold after Budget 2025), claim Section 57 interest deduction, and compare whether dividend or growth MF option saves you more tax.

Calculate income tax on dividend income from stocks and mutual funds

Total dividend income (FY)

₹

Total dividends received from all companies and mutual funds this FY

Other income (salary/business)

₹

Your income excluding dividends (needed to determine slab rate)

Tax regime

New regime is default from FY 2023-24. Old regime allows more deductions.

Residency status

NRIs pay flat 20% TDS on dividends (unless DTAA lower rate)

Salaried employee?

Salaried individuals get standard deduction

Interest on borrowing for shares

₹

Section 57: deductible against dividend income, capped at 20% of dividends

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How to Use This Calculator

Dividend Tax tab

Enter your total dividend income from all stocks and mutual funds during the financial year, your other income (salary, business, etc.), and select your tax regime. The calculator computes the marginal tax on your dividends at your applicable slab rate, including surcharge and cess. For NRIs, select "Non-Resident" to see the flat 20% TDS computation.

TDS on Dividends tab

Add each company or AMC (mutual fund house) individually with the dividend amount received. The calculator checks whether TDS applies for each source based on the &rupee;10,000 per source threshold (raised from &rupee;5,000 by Budget 2025). This helps you understand your actual TDS deductions and plan for any shortfall or refund at ITR filing.

Dividend vs Growth tab

Compare the tax efficiency of MF dividend (IDCW) vs growth option. Enter your investment amount, expected return, dividend yield, and holding period. The calculator shows how much more wealth you accumulate with the growth option (LTCG at 12.5%) versus the dividend option (taxed at slab rate annually).

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The Formula

Dividend income in India is taxed as "Income from Other Sources" at the shareholder's slab rate since FY 2020-21 (DDT abolished):

Taxable Dividend Income:
Taxable Dividend = Total Dividends − Section 57 Deduction
Section 57 Deduction = min(Interest paid on borrowing, 20% of Dividend Income)

Tax on Dividends (Residents):
Total Income = Other Income + Taxable Dividend
Tax on Dividends = Tax on Total Income − Tax on Other Income (marginal method)

TDS Applicability (Section 194):
TDS = 10% of Dividend, if Dividend from a single company/AMC > &rupee;10,000/FY
(Budget 2025: threshold raised from &rupee;5,000 to &rupee;10,000)

TDS for NRIs (Section 195):
TDS = 20% (or lower DTAA rate) + applicable surcharge + 4% cess

Growth vs Dividend Comparison:
Dividend tax = Slab rate (up to 30% + surcharge + cess) on each payout
Growth LTCG = 12.5% on gains above &rupee;1,25,000 (Sec 112A, equity MF held > 12 months)

Example

Amit — &rupee;2 lakh dividend income with &rupee;10 lakh salary

Amit earns &rupee;10 lakh salary and &rupee;2 lakh in dividends from various stocks during FY 2025-26. He uses the new tax regime and has taken a loan to buy shares, paying &rupee;50,000 interest.

Step 1: Calculate taxable dividend

Total dividend income&rupee;2,00,000

Interest on borrowing&rupee;50,000

Sec 57 cap (20% of &rupee;2L)&rupee;40,000

Taxable dividend&rupee;1,60,000

Step 2: Compute marginal tax on dividend

Total income (10L + 1.6L)&rupee;11,60,000

Tax on &rupee;11.6L (new regime)&rupee;69,200

Tax on &rupee;10L without dividends&rupee;53,200

Marginal tax on &rupee;1.6L dividend&rupee;16,000

Cess (4%)&rupee;640

Total tax on dividend&rupee;16,640

Amit's effective tax rate on dividends is 8.32%. His &rupee;2 lakh gross dividend becomes &rupee;1,83,360 after tax. Since TDS of 10% (&rupee;20,000) was already deducted, he gets a &rupee;3,360 refund when filing ITR.

FAQ

How are dividends taxed in India since DDT abolition? ▼

Since FY 2020-21, the Dividend Distribution Tax (DDT) has been abolished. Dividends are now taxable in the hands of the shareholder at their applicable income tax slab rate. This means if you are in the 30% slab, you pay 30% tax (plus surcharge and 4% cess) on all dividend income. Dividends are classified as "Income from Other Sources" under Section 56(2)(i). This applies to dividends from both Indian companies and mutual funds. Companies deduct TDS under Section 194 before paying dividends.

What is the TDS threshold on dividends after Budget 2025? ▼

Budget 2025 (Finance Act 2025) raised the TDS threshold on dividends from &rupee;5,000 to &rupee;10,000 per company/AMC per financial year, effective 1 April 2025. Under Section 194, companies deduct TDS at 10% only when total dividend paid to a shareholder from that company exceeds &rupee;10,000 in a FY. This threshold applies per source — so you could receive &rupee;9,000 from each of 10 companies (&rupee;90,000 total) with zero TDS. If PAN is not provided, TDS is 20%.

Can I claim any deduction against dividend income? ▼

Under Section 57(i), you can claim a deduction for interest paid on loans taken to acquire the shares or mutual fund units that generated the dividend income. This deduction is capped at 20% of the total dividend income. No other expenses — such as demat charges, brokerage, or advisory fees — are allowed as deductions against dividend income. Note: Budget 2026 proposes to remove this Section 57 deduction for interest on dividend income from FY 2026-27 onwards, so use it while you can.

Is the growth option always better than dividend for mutual funds? ▼

For most investors in the 20% or 30% slab, the growth option is more tax-efficient. With the dividend (IDCW) option, each payout is taxed at your slab rate (up to 30% + surcharge + cess). With the growth option for equity mutual funds, you pay no tax until redemption, and if you hold for more than 12 months, gains above &rupee;1,25,000 are taxed at just 12.5% LTCG (Section 112A). The tax deferral benefit also allows your full corpus to compound. However, if you are in the nil or 5% slab, or need regular income, the dividend option may be acceptable. Use the "Dividend vs Growth" tab to compare with your specific numbers.

How are NRI dividends taxed in India? ▼

For NRIs, TDS on dividends is deducted at 20% under Section 195, plus applicable surcharge and 4% cess. However, if a Double Taxation Avoidance Agreement (DTAA) exists between India and the NRI's country of residence offering a lower rate, the NRI can claim the lower rate by submitting Form 10F, Tax Residency Certificate (TRC), and a declaration of beneficial ownership. Common DTAA dividend rates: US 25%, UK 15%, Singapore 15%, UAE 10%, Canada 15%. NRIs can also claim credit for Indian tax paid in their country of residence.

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