Deduction of tax at source from Dividend

The Board of Directors of the Company ('the Board') at the Meeting held on 1st June, 2021, have recommended Final Dividend Rs. 5.75 per Ordinary Share of Re. 1/- each for the financial year ended 31st March, 2021; the said Dividend is in addition to the Interim Dividend of Rs. 5.00 per share declared by the Board on 11th February, 2021 and paid on 10th March, 2021.

The Final Dividend, if declared at the 110th Annual General Meeting of the Company convened for 11th August, 2021, will be paid on 13th August, 2021.

Pursuant to the Income-tax Act, 1961, dividend income is taxable in the hands of the shareholders with effect from 1st April, 2020. The Company therefore will be required to deduct tax at source (TDS), as applicable, from the aforesaid dividend.

 

Resident Shareholders

(1) TDS will be deducted @ 10% on the amount of dividend payable where a valid Permanent Account Number (PAN) has been furnished by the resident shareholders to their respective Depository Participants (in case shares are held in dematerialised form) or to the Investor Service Centre (ISC) of the Company (in case shares are held in certificate form).

(2) TDS will be deducted @20% i.e. at twice the applicable rate on the amount of dividend payable where the resident shareholders:

  • have not furnished valid PAN; or

    Shareholders who are yet to furnish their PAN to their respective Depository Participants / ISC are therefore requested to do so immediately.
  • have not filed with the Income Tax Department their return of income for the previous two financial years and were subject to tax deduction / collection at source aggregating Rs. 50,000/- or more in each of those financial years.

    In this context, it may be noted that the Finance Act, 2021 has, inter alia, inserted Section 206AB of the Income-tax Act, 1961, effective 1st July, 2021, pursuant to which tax has to be deducted at twice the applicable rate from dividend payable to a 'Specified Person':

    'Specified Person' for the above purpose means a person who has:
    • not filed return of income for both the assessment years relevant to the 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 Income-tax Act, 1961 has expired; and
    • been subjected to tax deduction / collection at source aggregating to Rs. 50,000/- or more in each of the aforesaid two previous years.

      The Central Board of Direct Taxes (CBDT) has recently prescribed the functionality for determining whether a person fulfils the conditions of being a 'Specified Person' or not.

      Accordingly, the Company will verify from the above functionality provided by CBDT whether any Shareholder of the Company qualifies as a 'Specified Person' prior to applying the relevant TDS rates.

(3) No TDS will be deducted from dividend payable to:

(A) Individual Shareholders, if:-

  • the amount of dividend payable in a financial year does not exceed Rs. 5,000/-, or
  • their income is below the taxable limit and declaration is received from the shareholders in Form 15G (for persons up to age of 60 years) or in Form 15H (for persons above the age of 60 years).

(B) Insurance Companies (viz. LIC, GIC etc.), Mutual Funds and Alternative Investment Funds (incorporated in India), where the following documents complete in all respects are received from them.

 

Category of Shareholders Documents required
Insurance Companies
  1. A self-declaration that they are covered by the second proviso to Section 194 of the Income-tax Act, 1961 and has full beneficial interest with respect to the shares owned by it;
  2. Self-attested copy of registration certificate; and
  3. Self-attested copy of PAN.
Mutual Funds
  1. A self-declaration that they are governed by the provisions of Section 10(23D) of the Income-tax Act, 1961;
  2. Self-attested copy of registration certificate; and
  3. Self-attested copy of PAN.
Alternative Investment Funds (AIF)
  1. A self-declaration that the income of the AIF is exempt under Section 10(23FBA) of the Income-tax Act, 1961 and that they are governed as Category I or Category II AIF under the SEBI regulations;
  2. Self-attested copy of registration documents; and
  3. Self-attested copy of PAN.
Other non-individual resident shareholders
  1. A self-declaration that dividend receivable by them is exempt from tax under Section 196 or other relevant provisions of the Income-tax Act, 1961; and
  2. Self-attested copies of documents in support of the claim.

Non-Resident Shareholders

TDS will be deducted @ 20% (plus applicable surcharge and cess) or the Tax Treaty Rate, whichever is lower, on the amount of dividend payable to Foreign Portfolio Investors, Foreign Institutional Investors and other non-resident shareholders.

For availing the benefit of Tax Treaty Rate, the shareholders will be required to submit the following documents to the Company complete in all respects.

  • Self-attested copy of Indian Tax Identification Number (PAN), if any;
  • Self-attested copy of Tax Residency Certificate (TRC), covering the financial year 2021-22, issued by the tax authorities of the country of which the shareholder is a tax resident;
  • Form 10F, for the financial year 2021-22, duly filled up and signed;
    Click here to download Form 10F
  • A self-declaration primarily covering the following:
    • that the non-resident shareholder is eligible to claim the benefit of the respective Tax Treaty in the financial year 2021-22;
    • that the non-resident shareholder receiving the dividend income is the beneficial owner of such income; and
    • that the dividend income is not attributable / effectively connected to any Permanent Establishment (PE) or Fixed Base in India during the financial year 2021-22.
      Click here to download the self-declaration format
    • In case of shareholder being tax resident of Singapore, please furnish the letter issued by the competent authority or any other evidence demonstrating the non-applicability of Article 24 - Limitation of Relief under India-Singapore Double Taxation Avoidance Agreement (DTAA).

General instructions / information

(1) Submission of Tax Exemption Forms / documents for availing the benefit of Tax Treaty Rate, as applicable

The Tax Exemption Forms from resident shareholders and Forms & Documents from non-resident shareholders for availing the benefit of Tax Treaty Rate, as stated above, may please be filled up online on the ITC Eform Portal at https://eform.itcportal.com.The Eform Portal, which can also be accessed on the Company's corporate website www.itcportal.com under the section 'Investor Relations', is designed to facilitate completion of the Forms by the shareholders seamlessly in a user friendly manner. The completed Forms (and also duly signed) / documents should be submitted on the said Portal on or before 24th July, 2021. The duly signed Tax Exemption Forms, so generated on the Portal, can also be e-mailed at isc@itc.in or sent by post to ISC at 37 Jawaharlal Nehru Road, Kolkata 700 071 so as to reach on or before 24th July, 2021.

The consideration of the aforesaid documents, including application of beneficial Tax Treaty Rate, where applicable, will depend on the adequacy and completeness of such documents submitted by the shareholders and review of the same to the satisfaction of the Company. Documents received after 24th July, 2021 and / or incomplete documents will not be considered.

(2) In the event the benefit of lower tax on dividend cannot be provided by the Company in the absence of or due to late receipt of the aforesaid documents, shareholders will still have an option to claim appropriate refund, if eligible, at the time of filing their income tax returns. No claim shall lie against the Company for taxes once deducted.

(3) In the event the dividend income, as on the Record Date i.e. 11th June, 2021, is assessable to tax in the hands of a person other than the registered shareholder (viz., the shares are held by a clearing member, broker etc. on behalf of the actual beneficial owners), the registered shareholder (i.e. the said clearing member, broker etc.) is required to furnish to the Company on or before 24th July, 2021, a declaration containing the name, address, residential status and PAN of the actual beneficial owners to whom TDS credit is to be given, and reasons for giving credit to such persons. No request in this regard will be considered by the Company after 24th July, 2021.

(4)The TDS Certificate, if applicable, will be e-mailed to your registered e-mail address in due course of time, post payment of the aforesaid dividend.