My dividend income is below exemption limit, yet TDS was deducted: How to claim refund while filing ITR 2025”

Taxability of Dividend Income

Even if your dividend income is below the basic exemption limit, TDS may still be deducted. Here’s how to claim a refund and avoid future deductions. 

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I received dividends from listed companies amounting to Rs 70,000 during the last financial year. On this dividend income, Rs 2,500 was deducted as tax at source (TDS). My total taxable income, including this dividend, is below the basic exemption limit. Am I required to file an Income Tax Return (ITR)? Also, how can I avoid TDS on dividends in the future since I am not likely to have any tax liability going forward?

As per Section 139 of the Income Tax Act, an individual is required to file an ITR if the aggregate taxable income, before claiming deductions, exceeds the basic exemption limit applicable to the individual. Under the old tax regime, the basic exemption limit is Rs 2.5 lakh for those below 60 years of age, Rs. 3 lakh for senior citizens between 60 and 79 years, and Rs. 5 lakh for super senior citizens aged 80 and above.

Under the new tax regime, the basic exemption limit is Rs 3 lakh for all individuals, regardless of age. Even if you are not required to file an ITR mandatorily, you can do so voluntarily. If tax has been deducted from your income but your total income is below the exemption limit, you must file your ITR to claim a refund of the TDS.

In your case, since your income does not exceed the basic exemption limit, you are not required to file your ITR mandatorily. However, to claim a refund of the Rs 2,500 deducted as TDS, you will need to file your ITR.

TDS on dividend income is deducted if the total dividend payable by a company in a financial year exceeds Rs 10,000. If you are unlikely to have any tax liability in the future, you can submit Form 15G if you are below 60 years of age, or Form 15H if you are a senior citizen aged 60 years or above, to each company from which you expect to receive dividends.

This will allow the company to pay you dividends without deducting TDS. Separate forms must be submitted for each company every financial year. It is advisable to submit the relevant form at the start of the year to ensure that no TDS is deducted on your dividend income at all.

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