Deduction of Tax on Dividend Payments
HCLTech Limited - Communication of deduction of Tax at Source on Dividend
In accordance with the provisions of the Income Tax Act, 1961 (‘the Act’) as amended by and read with the provisions of the Finance Act, 2020, applicable with effect from April 1, 2020, dividend declared and paid by the Company is taxable in the hands of its shareholders, and accordingly the Company is required to deduct tax at source (TDS) at the applicable rates.
In view of the above, in the current financial year 2022-23, the Company shall be deducting TDS as per applicable provisions and TDS rates, while paying dividends.
Tax shall be deducted at source @10% for those resident shareholders with valid Permanent Account Number (PAN), @20% for resident shareholders without PAN or invalid PAN. Hence, the shareholders are advised to update their PAN with the Depository Participant, if shares are held in Demat form, and with the Registrar and Share Transfer Agent of the Company, if shares are held in Physical form.
However, no TDS shall be deducted on the Dividend payable to a resident Individual if the total dividend to be received by them during FY 2022-23 does not exceed Rs. 5,000.
TDS to be deducted at a higher rate in case of non-filers of Return of Income (Resident Shareholders)
The Finance Act, 2021, had inter alia inserted the provisions of section 206AB of the Act with effect from July 1, 2021. The provisions of section 206AB of the Act require the deductor to deduct tax at higher of the following rates from amount paid/ credited to 'specified person':
i. At twice the rate specified in the relevant provision of the Act; or
ii. At twice the rates or rates in force; or
iii. At the rate of 5%
The meaning of ‘specified person’, as amended by Finance Act, 2022 with effect from April 1, 2022, is provided in the said section as under:
'Specified person' means a person who has:
a) not furnished the return of income for the assessment year relevant to the previous year immediatelypreceding the financial year in which tax is required to be deducted, for which the time limit for furnishing the return of income under sub-section (1) of section 139 has expired; and
b) the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year.
In view of the above provisions of Section 206AB of the Act, in respect of dividend paid to resident shareholders in financial year 2022-23, who are liable to be treated as ‘specified person’ basis the output generated from the Compliance Portal of income-tax department, tax shall be deducted at source at twice the applicable rates.
Tax shall be deducted at source @20% (plus applicable surcharge and cess) on dividend paid to non-resident shareholders, including Foreign Institutional Investors (‘FIIs’) and Foreign Portfolio Investors (‘FPIs’), in accordance with the provisions of section 195 and section 196D of the Act respectively.
Tax shall be deducted at source @10% (plus applicable surcharge and cess) on dividend paid to ‘specified fund’ as defined in clause (c) of the Explanation to clause (4D) of section 10, in accordance with the provisions of section 196D of the Act.
In case the non-resident shareholders, including FIIs and FPIs, wish to take the benefit of the rates as prescribed under the applicable Double Tax Avoidance Agreement (‘DTAA’), they shall be required to submit the necessary documents as prescribed in Annexure-A. In that case, the tax shall be deducted @20% (plus applicable surcharge and cess) or the rate of tax provided in DTAA for such income, whichever is lower.
TDS to be deducted at a higher rate in case of non-filers of Return of Income (Non-Resident Shareholders)
In view of the provisions of Section 206AB of the Act excluding a non-resident not having a permanent establishment (“PE”) in India from the definition of ‘specified person’, the non-resident shareholders shall be required to submit the necessary documents as prescribed in Annexure-A, in the absence of which tax shall be deducted at source at twice the applicable rates (plus applicable surcharge and cess).
The shareholders have an option to apply to the Company for non-deduction of TDS or deduction of TDS at a lower rate by providing the necessary documents to the Company as prescribed in Annexure-A to this letter.
The above referred documents, duly completed and signed (in xerox or original, as described in below table) should be sent to the Registrar & Transfer Agent (“RTA”) of the Company, M/s. Link Intime India Private Limited as directed in Annexure-A.
- In case where only xerox documents are required to be sent as mentioned in Annexure- A, the same should be sent to email@example.com through registered e-mail of the shareholder quoting Name, Folio number/ Demat Account No., Number of shares and PAN details of the shareholder on or before 5:00 P.M. (IST) of the Record Date fixed for the respective dividend in order to enable the Company to determine and deduct appropriate TDS/ withholding tax or the same can be uploaded online at https://linkintime.co.in/formsreg/submission-of-form-15g-15h.html
- In case where the originally signed documents are required to be submitted as mentioned in Annexure- A, the same should be submitted to our RTA at its Mumbai/ New Delhi address (Mr. Pradeep Mokale - Assistant Vice President, M/s. Link Intime India Private Limited, Unit- HCLTech Limited, C-101, 247 Park, L B S Marg, Vikhroli (West), Mumbai- 400083 or to Link Intime India Private Limited, Noble Heights, 1st floor, Plot No NH-2, C-1 Block, LSC, near Savitri Market, Janakpuri, New Delhi- 110058 within the above prescribed time limit. No communication on the tax deduction shall be entertained in respect of the dividend declared after the above time limit.
Hence, in order to take any benefit of the TDS on the dividends paid, if any declared during the financial year 2022-23, the above documents should be submitted on or before the resepective Record Date of the dividend.
The declarations under Rule 37BA of the Income Tax Rules, 1962, if applicable, need to be submitted on or before the above Record date for enabling the Company to consider the same, otherwise the same shall be considered after the end of the respective financial year.
All communications/ queries in this respect should be addressed and sent to our RTA, Link Intime India Private Limited at its email address mentioned above
Shareholders may note that in case the tax on said dividend is deducted at a higher rate in absence of receipt or insufficiency of the aforementioned details/documents required from the shareholder, an option is available to the shareholder to file the return of income as per Income Tax Act, 1961 and claim appropriate refund, if eligible.
To view / download Form 10 F click here.
To view / download Form 15 G & 15 H click here.
To view / download Form No PE and Beneficial Ownership Declaration click here.
To view / download Form No PE declaration for non-resident shareholders for the purposes of Section 206AB of the Act click here
In order to know the amount of tax deducted, the Company shall be sending, after payment of dividend, the TDS certificate in respect of tax deducted to its shareholders in due course. Alternatively, the shareholders can also check Form 26AS from their e-filing accounts at https://incometaxindiaefiling.gov.in.
List of Documents to be submitted for non-deduction of Tax at Source or for applying for concessional Rates of TDS, subject to condition that provisions of Section 206AB of the Act are not applicable in the case of a shareholder
|S. No.||Category||Documents required under the Income Tax Act, 1961 for applying for concessional Rates of TDS/ Nil TDS||Mode of submission|
Certificate under section 197 of the Act
Form 15G/ 15H [in respect of sections 197A(1) & 197A(1C) of the Act respectively]
One xerox copy
Two copies in original
|2||Non-Resident Individuals /Foreign Nationals/ Foreign Banks/ Foreign Body Corporates, Erstwhile OCBs / FPI/FII||
Certificate under section 195 or 197 of the Act
Tax Residency Certificate issued by the Revenue/ Tax Authorities of the country of which the shareholder is Resident, for the year in which dividend is to be received & Form 10F as per the Act, and Self-Declaration – No PE and Beneficial Ownership
One xerox copy
One copy each of all documents in color scanned or in original
(For the purposes of section 206AB of the Act)
Tax Residency Certificate issued by the Revenue/ Tax Authorities of the country of which the shareholder is Resident, for the year in which dividend is to be received
AndNo PE Declaration
|One copy each in color scanned or in original|
|4||HUFs/ Trust/ Trusts/Associations/ Resident Bodies Corporates/ Commercial Banks/ Indian Financial Institutions/ Clearing Members||Certificate under section 197 of the Act||One xerox copy|
|5||Foreign bodies corporate||Certificate under section 195 or 197 of the Act||One xerox copy|
|6||Mutual Funds||Certificate that Mutual Fund is specified under section 10(23D) of the Act.||One xerox copy|
(Formats of the Form 15G/15H for resident shareholders and Form 10F/Self-Declaration(s) for non-resident shareholders are enclosed herewith for your reference.)