Tax Declaration for Dividend
We wish to inform you that the Board of Directors of your Company (“Board”) have at their meeting held on 23 June 2021 recommended dividend of 80% on equity share having nominal value of Rs.10/- and Rs 3/- each for the financial year ended 31st March 2021.
The dividend, as recommended by the Board, if approved at the ensuing Annual General Meeting, will be paid to shareholders holding Equity Shares of the Company, either in electronic or in Physical Form after the Book Closure date 16 September 2021 for determining eligibility of shareholders to receive the dividend.
In terms of the provisions of the Income-tax Act, 1961, (“the Act”), dividend paid or distributed by a Company on or after 1st April 2020 is taxable in the hands of the shareholders. The Company shall therefore be required to deduct tax at source at the time of payment of dividend. The deduction of tax at source will be based on the category of shareholders and subject to fulfilment of conditions as provided here in below:
For Resident Shareholders
Tax will be deducted at source (“TDS”) under Section 194 of the Act @ 10% on the amount of dividend payable unless exempt under any of the provisions of the Act. However, in case of individuals, TDS would not apply if the aggregate of total dividend distributed to them by the Company during financial year does not exceed Rs.5,000. Recording of the PAN for the registered Folio/DP ID-Client ID is mandatory. In the absence of valid PAN, tax will be deducted at a higher rate of 20%, as per Section 206AA of the Act. The shareholders are requested to update their valid PAN with the MAS Services Limited (in case of shares held in Physical Mode) and depositories (in case of shares held in Demat Mode) by 10th September 2021.
Tax at source will not be deducted in cases where a shareholder provides Form 15G (applicable to individual) / Form 15H (applicable to an individual above the age of 60 years), provided that the eligibility conditions are being met. Blank Form 15G and 15H can be downloaded from the link given at the end of this communication or from the website of the Company viz. www.indofil.com. Please note that all fields mentioned in the Form are mandatory and Company may reject the forms submitted if it does not fulfil the requirement of law. To avail the benefit of non-deduction of tax at source, we request you to update PAN and provide duly executed Form 15G/ 15H by email to firstname.lastname@example.org by 10th September 2021.
Shareholders who are required to link Aadhar number with PAN as required under section 139AA(2) read with Rule 114AAA, should link the same by 10 September 2021. If, as required under the law, any PAN is found to have not been linked with Aadhar by 30 September 2021 then such PAN will be deemed invalid, and TDS would be deducted at higher rates u/s206AA of the Act.
NIL /lower tax shall be deducted on the dividend payable to following resident shareholders on submission of self-declaration as listed below:
- Insurance companies: Declaration by shareholder qualifying as Insurer as per section 2(7A) of the Insurance Act, 1938 along with self-attested copy of PAN card;
- Mutual Funds: Declaration by Mutual Fund shareholder eligible for exemption u/s 10(23D) of the Income- tax Act, 1961 along with self-attested copies of registration documents and PAN card;
- Alternative Investment Fund (AIF) established in India: Declaration that the shareholder is eligible for exemption under section 10(23FBA) of the Act and they are established as Category I or Category II AIF under the SEBI regulations. Copy of self-attested registration documents and PAN card should be provided.
- New Pension System Trust: Declaration along with self-attested copy of documentary evidence supporting the exemption and self-attested copy of PAN card.
- Other shareholders: Declaration along with self-attested copy of documentary evidence supporting the exemption and self-attested copy of PAN card.
- Shareholders who have provided a valid certificate issued u/s. 197 of the Act for lower / nil rate of deduction or an exemption certificate issued by the income tax authorities along with Declaration.
The self-declaration can be downloaded from the link given at the end of this communication or from the website of the Company viz. www.indofil.com. To avail the benefit of lower/ non-deduction of tax at source, we request you duly executed Form self-declaration along with copy of PAN by email to email@example.com by 10 September 2021.
Section 206AB of the Act
Rate of TDS @10% u/s 194 of the Act is subject to provisions of section 206AB of Act (effective from 1 July 2021) which introduces special provisions for TDS in respect of non-filers of income-tax return. As provided in section 206AB, tax is required to be deducted at higher of following rates in case of payments to specified persons:
- at twice the rate specified in the relevant provision of the Act; or
- at twice the rate or rates in force; or
- at the rate of 5%.
Where sections 206AA and 206AB are applicable i.e. the specified person has not submitted the PAN as well as not filed the return; the tax shall be deducted at the higher of the two rates prescribed in these two sections.
The term ‘specified person’ is defined in sub section (3) of section 206AB who satisfies the following conditions:
- A person who has not filed the income tax return for two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit of filing of return of income under section 139(1) of the I-T Act has expired; and
- The aggregate of TDS and TCS in his case is ₹50,000 or more in each of these two previous years.
The non-resident who does not have the permanent establishment is excluded from the scope of a specified person.
Income Tax Department has provided a functionality “Compliance Check to facilitate and verify if a person is a “Specified Person” as per section 206AB of the I-T Act on Reporting Poral. Outcome of the Reporting Portal on 16 Sep 2021 shall be considered for determining whether shareholder is specified person or not and accordingly TDS shall be deducted.
For Non-Resident Shareholders (including Foreign Institutional Investors and Foreign Portfolio Investors)
Tax is required to be withheld in accordance with the provisions of Section 195 and section 196D of the Act at applicable rates in force. As per the relevant provisions of the Act, the tax shall be withheld @ 20% (plus applicable surcharge and cess) on the amount of dividend payable. However, as per Section 90 of the Act, a non-resident shareholder has the option to be governed by the provisions of the Double Tax Avoidance Agreement (“DTAA”) between India and the country of tax residence of the shareholder if they are more beneficial to the shareholder. For this purpose, i.e. to avail the tax treaty benefits, the non-resident shareholder will have to provide the following avail the tax treaty benefits, the non-resident shareholder will have to provide the following documents by to firstname.lastname@example.org.:
- Self-attested copy of PAN card, if any, allotted by the Indian income tax authorities;
- Self-attested copy of Tax Residency Certificate (“TRC”) obtained from the tax authorities of the country of which the shareholder is resident;
- Self-declaration in Form 10F, if all the details required in this form are not mentioned in the TRC;
- Self-declaration by the non-resident shareholder of meeting treaty eligibility requirement and satisfying beneficial ownership requirement (Non-resident having PE in India would need to comply with provisions of section 206AB of the IT Act).
- In case of Foreign Institutional Investors and Foreign Portfolio Investors, self-attested copy of SEBI registration certificate.
- In case of shareholder being tax resident of Singapore, please furnish the letter issued by the competent authority or any other evidences demonstrating the non applicability of Article 24 - Limitation of Relief under India-Singapore Double Taxation Avoidance Agreement (DTAA).
The self-declarations referred to in point nos. (iii) to (iv) can be downloaded from the link given at the end of this communication or from the website of the Company viz. www.indofil.com.
Application of beneficial DTAA rate shall depend upon the completeness and satisfactory review by the Company, of the documents submitted by non- resident shareholders and meeting requirement of Act read with applicable tax treaty. In absence of the same, the Company will not be obligated to apply the beneficial DTAA rates at the time of tax deduction on dividend amounts.
To summarise, dividend will be paid after deducting the tax at source as under:
- NIL for resident shareholders receiving dividend upto Rs.5000 or in case Form 15G / Form 15H (as applicable) along with self-attested copy of the PAN card is submitted.
- 10% for other resident shareholders in case copy of PAN card is provided/available.
- 20% for resident shareholders if copy of PAN card is not provided / not available.
- Tax will be assessed on the basis of documents submitted by the non-resident shareholders.
- 20% plus applicable surcharge and cess for non-resident shareholders in case the relevant documents are not submitted.
- Lower/ NIL TDS on submission of self-attested copy of the valid certificate issued under section 197 of the Act.
- Aforesaid rates will be subject to applicability of section 206AB of the Act. Higher TDS rate in case of ‘’specified person’’ as per reporting portal of Income-tax Authority.
In terms of Rule 37BA of Income Tax Rules 1962, if dividend income on which tax has been deducted at source is assessable in the hands of a person other than the deductee, then such deductee should file self-declaration with Company in the manner prescribed by the Rules.
Company is obligated to deduct tax at source (TDS) based on the records available with RTA and no request will be entertained for revision of TDS return. No communication on the tax determination / deduction shall be entertained after 10 September 2021.
In case tax on dividend is deducted at a higher rate in the absence of receipt or defect in any of the aforementioned details / documents, you will be able to claim refund of the excess tax deducted by filing your income tax return. No claim shall lie against the Company for such taxes deducted.
The Company will arrange to email a soft copy of the TDS certificate at the shareholders registered email ID in due course, post payment of the said Dividend. Shareholders will also be able to see the credit of TDS in Form 26AS, which can be downloaded from their e-filing account at https://incometaxindiaefiling.gov.in.
Disclaimer: This communication shall not be treated as an advice from the Company or its Registrar & Transfer Agent. Shareholders should obtain the tax advice related to their tax matters from a tax professional.