ITR Filing: Taxpayers now need to give a quarter-wise breakup of dividend income – Here’s why

With effect from FY21, the government has made dividend distributed by an organisation taxable in the hands of investors.

It should be noted that now taxpayers need to pay advance tax in the quarter in which the dividend is gained.

In terms of the present Assessment Year of Income Tax Returns Filing, i.e AY22, several changes have been made. And, one such major change among others is reporting of dividend income. In case a taxpayer has dividend income in the last financial year, then he/she is required to take note of the following changes in order to ensure error-free filing of Income Tax Returns.

Prior to the Financial Year FY21, dividend income up to Rs 10 lakh in a particular year was not taxable for the taxpayers as organisations needed to pay a Dividend Distribution Tax (DDT) before making dividend payments. However, those who received dividends of more than Rs 10 lakh used to pay only 10% tax on the dividend payout.

With effect from FY21, however, the government has made dividend distributed by an organisation taxable. Also, the domestic firms are responsible to deduct tax at source (TDS) at 10% if the cluster charge of dividend distributed to resident shareholders crosses the amount of Rs 5,000 in a financial year.

Initially, while filing ITR, dividend income was revealed under the head ‘Exempted Income’. However, now it would appear under the head ‘Income from other sources’ as per section 56 (2) (i) as this income becomes taxable now. It is important to mention here that in the current ITR forms announced by the government, the schedule OS is altered to include the details of the dividend income earned by the taxpayers by this year.

Quarter-wise breakup of dividend income

In order to calculate the interest for the default in payment of advance tax liability, taxpayers are now required to give a quarter-wise breakup of dividend income received in a financial year, say tax experts.

The breakup can be provided for the span of 1st April 2020 to 15th June 2020, 16th June 2020 to 15th September, 16th September 2020 to 15th December 2020, 16th December 2020 to 15th March 2021 and 16th, March 2021 to 31st March 2021. Moreover, this quarterly reporting is compulsory to aid the relaxation of advance tax penalties on dividend income.

It should be noted here that now taxpayers need to pay advance tax in the quarter in which the dividend is gained. Earlier, exclusion from interest penalty for non-payment of the advance tax on dividend income was there as it was not possible to cite dividend income in advance. It is highly likely that dividend income will be provided pre-filled to taxpayers from this year as the Income Tax department has made it compulsory for the organisations to announce the information of the dividend paid to the department. Noteworthy, if you get the pre-filled data in your ITR, you should check the information clearly.

(By Amit Gupta, Co-Founder and MD, SAG Infotech)

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