Tax on Dividend Income: Do I Need to Pay Tax on Dividend Income?

An individual, whether an Indian resident or a Non-Resident Indian (NRI), may have multiple income sources and may be liable to pay tax on such income. One such income is dividend income. Dividends represent a portion of a company’s profits distributed to shareholders when you invest in the stock market, mutual funds, or both.

Since dividends generate taxable income, a common question arises:
Do we need to pay tax on dividend income while filing the Income Tax Return (ITR)?

This blog on tax on dividend income in India answers all your questions in detail.

Dividends are payments made by companies to their shareholders out of accumulated profits or retained earnings. Dividend income generally arises when a company decides to distribute a part of its profits to its shareholders.
This income is common among individuals investing in equity shares, mutual funds, and Unit Linked Insurance Plans (ULIPs).

As per Section 2(22) of the Income Tax Act, 1961, dividend income has a wide meaning and includes: