How does the taxation of dividend income differ from the taxation of other types of investment income?

In India, dividend income is treated differently from other types of investment income in terms of taxation. Prior to April 1, 2020, dividend income was taxfree in the hands of the investor, but the company paying the dividend was required to pay a Dividend Distribution Tax (DDT) of 15% (plus surcharge and cess). However, the tax system has been changed since April 1, 2020, and dividend income is now taxed as per the individual's tax slab rate. The company does not have to pay any DDT on the dividend paid to its shareholders.

Under the current tax system, dividends up to Rs. 5,000 are taxfree in the hands of the investor. For dividends exceeding Rs. 5,000, the investor is required to pay tax as per their income tax slab rate. Additionally, dividend income is also subject to TDS (Tax Deducted at Source) at the rate of 7.5% for dividends paid by domestic companies and 20% for dividends paid by foreign companies. However, TDS is not applicable if the total dividend income for an individual is below Rs. 5,000.

It's important to note that these rates and rules are subject to change based on the tax laws in India, and it's always advisable to consult with a tax professional for guidance.