Budget 2025: How will section 194 benefit individuals receiving dividends

Budget 2025: The government has announced a significant change for stock market investors in the Budget 2025. Under Section 194, the threshold for TDS (Tax Deducted at Source) on dividends for individual shareholders has been increased.

As per the new provision, TDS will now apply only to annual dividends exceeding ₹10,000, up from the previous limit of ₹5,000.

This means investors will no longer face TDS on dividends up to ₹10,000.

This move offers relief to small investors, as they will not have to pay TDS on dividends below ₹10,000, improving their cash flow.Previously, individuals receiving over ₹5,000 in dividends from a company or mutual fund in a financial year were subject to TDS at a rate of 10%. If the individual didn’t have a PAN (Permanent Account Number), the TDS rate would increase to 20%.

To avoid TDS deductions, individuals whose total income is within the tax-free limit can submit Form 15G (for non-senior citizens) or Form 15H (for senior citizens).

Dividend income is added to the total income and taxed according to the applicable income tax slab rates. For instance, if your total income exceeds ₹10 lakh, the dividend income will be taxed at 30%.

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