Section 194 - Dividends - Income-tax Act, 1961

Dividends. 194. The principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India, shall, before making any payment 6 [ by any mode ] in respect of any dividend or before making any distribution or payment to a shareholder, 1 [who is resident in India,] of any dividend within the meaning of sub-clause ( a ) or sub-clause ( b ) or sub-clause ( c ) or sub-clause ( d ) or sub-clause ( e ) 12 [ or sub-clause (f) ] of clause ( 22 ) of section 2, deduct from the amount of such dividend, income-tax 2 [***] 7 [ at the rate of ten per cent. ] : 3 [Provided that no such deduction shall be made in the case of a shareholder, being an individual, if- ( a ) the dividend is paid by the company by 8 [ any mode other than cash ] ; and ( b ) the amount of such dividend or, as the case may be, the aggregate of the amounts of such dividend distributed or paid or likely to be distributed or paid during the financial year by the company to the shareholder, does not exceed 9 [ five thousand rupees ] : Provided further that the provisions of this section shall not apply to such income credited or paid to- ( a ) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), in respect of any shares owned by it or in which it has full beneficial interest; ( b ) the General Insurance Corporation of India (hereafter in this proviso referred to as the Corporation) or to any of the four companies (hereafter in this proviso referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any shares owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; ( c )any other insurer in respect of any shares owned by it or in which it has full beneficial interest :] 10 [****] 11 [ (d) a business trust , as defined in clause (13A) of section 2, by a special purpose vehicle referred to in the Explanation to clause (23FC) of section 10; (e) any other person as may be notified by the Central Government in the Official Gazette in this behalf. ] ---------------------- Notes :- 1. Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 2. and super-tax omitted by the Finance Act, 1965, w.e.f. 1-4-1965. 3. Substituted for the first and second provisos by the Finance Act, 2002, w.e.f. 1-6-2002. Prior to their substitution, the first proviso, as inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-10-1977, later on substituted by the Finance Act, 1984, w.e.f. 1-6-1984 and amended by the Finance Act, 1987, w.e.f. 1-6-1987 and Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, and the second proviso, as inserted by the Finance Act, 1997, w.e.f. 1-6-1997, read as under : Provided that no such deduction shall be made in the case of a shareholder, being an individual, of a company in which the public are substantially interested, if- (a) the dividend is paid by such company by an account payee cheque; and (b) the amount of such dividend or, as the case may be, the aggregate of the amounts of such dividend distributed or paid or likely to be distributed or paid during the financial year by the company to the shareholder, does not exceed two thousand five hundred rupees : Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. Prior to its omission by the Finance Act, 1993, w.e.f. 1-6-1993, second proviso was amended by the Finance Act, 1965, w.e.f. 1-4-1965, the Finance (No. 2) Act, 1977, w.e.f. 1-10-1977 and the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 4. Substituted for one thousand by the Finance Act, 2003, w.r.e.f. 1-8-2002. 5. Inserted, by the Finance Act, 2003, w.r.e.f. 1-4-2003. 6. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as in cash or before issuing any cheque or warrant 7. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as at the rates in force 8. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as an account payee cheque 9. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as 4 [two thousand five hundred] rupees 10. Omitted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as 5 [Provided also that no such deduction shall be made in respect of any dividends referred to in section 115-O.] 11. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2020 12. Substituted vide Section 52 of the Finance (No. 2) Act, 2024 dated 16-08-2024 w.e.f. 01-10-2024