Income Tax Return: Taxpayers Can Now File A Quarter-Wise Breakup of Dividend Income

Many modifications to filing regulations for income tax return have been implemented for the existing assessment year. However, one adjustment is the way dividend income is reported. After April 1, 2020, investors will be required to pay tax on dividend income generated. If the total amount of dividends issued to resident shareholders in a financial year surpasses Rs.5,000, domestic firms are required to deduct tax at source (TDS) at a rate of 10%. As a consequence, the current regime has declared a company's dividends are taxable for the investors.

Dividend income up to Rs 10 lakh annually was not taxable in the hands of taxpayers before the financial year FY21 since businesses were mandated to pay dividend distribution tax (DDT) in dividend payments. Dividend income was formerly reported under the category 'Exempted Income,' but as it is a taxable income from FY21, it will now be reported under the heading 'Income from other sources,' as per section 56(2)(i), according to the tax department. According to tax experts, taxpayers can now give a quarter-by-quarter breakdown of dividend income received in a financial year for the purpose of calculating interest income for delinquency in settlement of the advance tax due.

For the periods 1st April 2020 to 15th June 2020, 16th June 2020 to 15th September 2020, 16th September 2020 to 15th December 2020, 16th December 2020 to 15th March 2021, and 16th March 2021 to 31st March 2021, the breakdown can be provided. For calculating the interest due for failure to pay an advance tax due, which is levied under section 234C, these quarterly dividend breakups could be a relief. If the company deducted tax when issuing dividends, you can claim TDS credit on your income tax return.

However, the income tax department has also mandated the taxpayers to pay advance tax in the quarter in which they have received the dividend income. If your ITR has pre-filled data, it is a smart idea to double-check the details before finalizing your income tax return. However, taxpayers should not also forget that they must commence filing their income tax returns (ITR) for the fiscal year 2020-21 as early as July 1. (FY21).