Taxable Under “Income from Other Sources”

• Dividend income received by HUF is taxable under the head “Income from Other Sources”

• Applies to dividends from shares, mutual funds, or company profits held by the HUF

• Income must be received in the name of the HUF, not individual members

• HUF’s PAN must be linked to all investment instruments earning dividends

• No separate exemption or special classification is applicable for HUFs

Taxability After Abolition of DDT

• Dividend Distribution Tax (DDT) was abolished from April 1, 2020

• Now, dividend is taxed in the hands of the recipient (i.e., HUF)

• Entire dividend amount is added to the total taxable income of the HUF

• Tax is levied at slab rates applicable to HUFs, just like individuals

• There is no concessional flat rate specifically for dividend income

TDS Applicability

• Companies and mutual funds deduct TDS at 10% if dividend exceeds ₹5,000 per year

• HUF must check Form 26AS for TDS credit while filing returns

• Lower TDS or exemption can be claimed using Form 15G/15H, if eligible

• TDS amount can be claimed as tax credit against final liability

• TDS applies only when the threshold is crossed per source annually

Exemptions and Deductions

• No specific deduction allowed against dividend income

• Deduction of interest expense up to 20% of dividend income is allowed under Section 57

• Other indirect or general expenses are not permitted as deductions

• Exemption under Section 10(34) no longer applies post-2020

• Accurate records of expenses and income are essential for claims

Return Filing and Disclosure

• Dividend income must be shown in HUF’s Income Tax Return (ITR-2)

• Declare it under “Income from Other Sources” with breakup details

• Reconcile with AIS and Form 26AS to avoid mismatch

• Include dividend while computing total income and tax liability

• Maintain dividend vouchers, demat statements, and TDS certificates as evidence