Tax on dividend reported by firms gets pre-filled in tax utility

—Name withheld on request

We have assumed that you are a resident of India and dividends received are from Indian companies. The finance minister in her Union Budget 2021 speech announced that to ease compliance for the taxpayer, among other incomes, details of dividend income will also be pre-filled in the income tax return utility.

The exact mechanics and the level of details pre-filled in the utility by the tax department remains to be seen and may be available in due course.

Generally, every company paying dividend in excess of ₹5,000 to a resident taxpayer is required to withhold taxes from such dividend at the rate of 10% and file a withholding tax return in this regard. Once the said withholding tax return is filed by the respective company(ies), the details of such dividends are reflected in the investor’s Form 26AS. Hence, in relation to pre-filled dividend information in the tax utility, from a practical perspective, you can expect that only such dividend incomes that have been reported by respective companies in their withholding tax returns (WTR) may get pre-filled in your tax filing utility.

In any case, even where the information is pre-filled in the utility, it is advisable that the taxpayer should cross check the pre-filled information from his/her dividend statements. You can obtain the details of the dividends paid to you from your broker or portfolio manager who may issue the dividend statements to you for the respective period. You can also check the details of the dividend from your bank statements where such dividends are credited. The company declaring the dividend would also send you a communication in this regard.

The dividend income shall be subject to tax in your hands at the applicable slab rates (plus applicable surcharge, if any, and education cess). It may be noted that maximum applicable surcharge on dividend income is 15%.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.