Tax on Dividend Income
Tax on dividend income: Every person paying a dividend shall deduct tax from the gross amount of the dividend paid at the rate specified in Division I of Part III of the First Schedule.
Rate of deduction of Tax on Dividend Income
The rate of Tax on Dividend Income to be deducted under section 150 are as under:
7.5% in the case of dividends declared or distributed by purchaser of a power project privatized by WAPDA or on shares of a company set up for power generation or on shares of a company, supplying coal exclusively to power generation projects;
15% for filers other than mentioned in (a) above
20% for non-filers other than mentioned in (a) above
Provided that the rate of Tax on Dividend Income required to be deducted by a collective investment scheme, REIT Scheme or a mutual fund shall be-
Person |
Stock Fund |
Money market Fund, Income Fund or REIT Scheme or any other fund |
|
|
|
Filer | Non-Filer | |
|
Individual |
12.5% |
12.5% |
15% |
|
Company |
12.5% |
25% |
25% |
| AOP | 12.5% | 12.5% |
15% |
Provided further that if a Developmental REIT Scheme with the object of development and construction of residential buildings is set up by Thirtieth day of June, 2018, rate of tax on dividend income received by a person from such Developmental REIT Scheme shall be reduced by fifty percent for three years from thirtieth day of June, 2018.
Provided further that. in case of a stock fund if dividend receipts of the fund are less than capital gains, the rate of tax deduction shall be 12.5%:
Provided further that the rate of tax on dividend income received by a person, other than a company, from a money market mutual fund shall be 10%, if the amount of dividend does not exceed two and a half million Rupees.
Rate of tax deduction on dividend received from a company till tax year 2014 was 10%.
Tax deducted under this section to the extent of rates prescribed for filers is full and final discharge of liability as provided in section 5 read with section 8 and the excess tax deducted on account of higher rate of non-filer is adjustable in the return filed for the relevant tax year.
Advance tax on Dividend u/s 150 and 236S
The FBR has explained amendment made by Finance Act 201.7 in Circular No. 4 of 2017 dated 6.9.2017 as under:
The rates for advance tax on dividend have been enhanced in line with chargeability of tax on dividend income as under:—
| Description | Tax rates Prior to Finance Act, 2017 | Tax Rates w.e.f. 1st July, 2017 | ||
| Filer | Non-Filer | Filer | Non-Filer | |
| A. Dividend paid by
(i) purchaser of a power project privatized by WAPDA (ii) a company set up for power generation (iii) a company supplying coal; Exclusively to power generation, projects |
7.5% | 7.5% | 7.5% | 7.5% |
| Dividend paid by persons other than “A“ above | 12.5% | 20% | 15% | 20% |
The rate of tax required to be deducted by a stock fund, money market fund, income fund, REIT scheme or any other fund upon payment of dividend has been increased from 10% to 12.5% through the Finance Act, 2017 as under:-
| Person | Stock Fund | Money Market Fund , Income Fund , REIT Scheme or any other fund | ||||
| Tax rates Prior to Finance Act, 2017 | Tax rates w.e.f. 1″ July, 2017 | Tax rates Prior to Finance Act, 2017 | Tax rates w.e.f. 1″ July, 2017 | |||
| Filer | Non-Filer | Filer | Non-Filer | |||
| Individual | 10% | 12.5% | 10% | 15% | 12.5% | 15% |
| Company | 10% | 12.5% | 25% | 25% | 25% | 25% |
| AOP | 10% | 12.5% | 10% | 15% | 12.5% | 15% |
The Finance Act, 2017 also stipulates that the rate of advance tax on dividend received by a person, not being a company, from a money market mutual fund shall be 10% if the amount of dividend being paid does not exceed Rs.2.5 Million.
Statements regarding dividends rule 52
The Principal Officer of a resident company in respect of dividends will furnish bi-annual and annual statements.
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