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 ¹[by any mode] in respect of any dividend or before making any distribution or payment to a shareholder, 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) ^7. [or sub-clause (f) ] of clause (22) of section 2, deduct from the amount of such dividend, income-tax ²[at the rate of ten per cent] :

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 ³[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 ⁴[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 :

 ⁵[***]

      ⁶[(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.]

Note:-

1. Substituted by the Finance Act, 2020  w.e.f. (shall come into force on such date as the Central Goverment may, by notification in the Official Gazette).

In section 194, for the words;

in cash or before issuing any cheque or warrant

the following shall be substituted namely;

by any mode

2. Substituted by the Finance Act, 2020  w.e.f. (shall come into force on such date as the Central Goverment may, by notification in the Official Gazette).

In section 194, for the words;

at the rates in force

the following shall be substituted namely;

at the rate of ten per cent.

3. Substituted by the Finance Act, 2020  w.e.f. (shall come into force on such date as the Central Goverment may, by notification in the Official Gazette).

In section 194, in the first proviso,in clause (a), for the words;

an account payee cheque

the following shall be substituted namely;

 any mode other than cash

4. Substituted by the Finance Act, 2020  w.e.f. (shall come into force on such date as the Central Goverment may, by notification in the Official Gazette).

In section 194, in the first proviso,in clause (b), for the words;

two thousand five hundred rupees

the following shall be substituted namely;

 five thousand rupees

5. Omitted by the Finance Act, 2020  w.e.f. (shall come into force on such date as the Central Goverment may, by notification in the Official Gazette).

In section 194, The third proviso shall be omitted

 Provided also that no such deduction shall be made in respect of any dividends referred to in section 115-O.

6. Inserted by the Finance Act, 2021  w.e.f. 01.04.2020

7. Inserted by the Finance Bill 2024 dated  07.08.2024 w.e.f 01.10.2024