Moment guide · FY 2026-27

I received dividends on my shares

How are dividends on shares and mutual funds taxed in FY 2026-27?

Sec 194Sec 194KSec 56(2)Sec 15GSec 15HVerified 2026-08-11

Post-FA-2020, dividends are fully taxable at your slab rate with no ₹10,000 exemption — ₹5,000 is only the TDS threshold. TDS is deducted at 10% u/s 194 for company dividends above ₹5,000 per company and u/s 194K for mutual fund dividends above ₹5,000 per AMC; foreign dividends are taxed at slab with foreign tax credit via Form 67.

Your legitimate options

Every route the statute actually gives you — with its condition, cap and deadline.

Route	Condition	Cap / deadline
Form 15G/15H route	Total income below the basic exemption limit	NIL TDS on domestic dividends
Foreign tax credit route	Dividend from foreign shares already taxed abroad	Slab rate with FTC claimed via Form 67
Normal TDS route	Domestic dividend > ₹5,000 per company or per MF house in a year	10% TDS u/s 194 (companies) and u/s 194K (mutual funds)

The #1 trap

There is no ₹10,000 dividend exemption — the ₹5,000 figure is only the TDS threshold; post-FA-2020, the entire dividend is added to income and taxed at your slab rate, with reinvested dividends also taxable in the year of declaration.

The decision path

Follow it top to bottom — the first condition that matches is your answer.

IF dividend from an Indian company exceeds ₹5,000 in the year → 10% TDS u/s 194
IF dividend from a mutual fund exceeds ₹5,000 per AMC in the year → 10% TDS u/s 194K
IF total income is below the exemption limit → file Form 15G/15H to stop TDS
IF foreign dividend was taxed abroad → include gross dividend u/s 56(2) at slab and claim FTC through Form 67
IF no TDS was deducted on a large dividend → pay advance tax by 15-Mar to avoid interest u/s 234C

Worked example

Meera, salaried IT professional

Meera earns ₹24 lakh salary under the old regime and holds a dividend portfolio. In FY 2026-27 she received ₹8,000 from HDFC Bank, ₹6,200 from Infosys, ₹4,800 from a debt mutual fund, and a US stock dividend of ₹12,000 gross on which US withheld 15% (₹1,800), leaving ₹10,200 credited to her account. Because the HDFC dividend exceeds ₹5,000, the company deducts 10% TDS u/s 194 — ₹800. Infosys also crosses ₹5,000, so ₹620 is deducted. The debt fund dividend of ₹4,800 is below the ₹5,000 per-AMC threshold, so no 194K TDS applies. The US dividend is added at gross value (₹12,000) u/s 56(2) and taxed at her slab of 30% plus 4% cess, giving tax of ₹3,744; she claims the ₹1,800 US withholding as a foreign tax credit by filing Form 67, leaving a net Indian liability of ₹1,944 on that dividend. Her total dividend income for the year is ₹31,000 (₹8,000 + ₹6,200 + ₹4,800 + ₹12,000), all added to salary. Dividend reinvestment plans do not help — the dividend is taxable in the year it is declared, even if reinvested. Since her income is far above the exemption limit, Form 15G/15H is not available. TDS of ₹1,420 was already deducted domestically, but no Indian TDS applied to the US dividend, so she must pay the uncovered ₹1,944 as advance tax by 15-Mar to avoid 234C interest. A quick call with us dials in the final figure.

Questions people actually ask

Is there any exemption for dividend income?

No. Post-FA-2020, dividends are fully taxable at slab rates. The ₹10,000 figure sometimes quoted is a myth — ₹5,000 is only the TDS threshold u/s 194/194K.

When is TDS deducted on dividends?

Under s.194, 10% TDS applies when dividends from one company exceed ₹5,000 in a year; under s.194K, 10% TDS applies when dividends from one mutual fund house exceed ₹5,000 in a year.

How do I claim credit for foreign dividend tax?

Report the gross foreign dividend under s.56(2) at slab rates, file Form 67 with your return, and claim the foreign tax credit in your ITR under the relevant DTAA.

Do I need to pay advance tax on dividend income?

Yes — if the total tax liability after TDS exceeds ₹10,000 and the dividend was not subjected to adequate TDS, advance tax (including the 15-March instalment) is required to avoid interest u/s 234C.

Advance Tax Calculator →TDS Calculator →Or talk to us about your numbers →

Sections: 194, 194K, 56(2), 15G, 15H, 80A, 234C · Last verified 2026-08-11 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).