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Communication to Shareholders - Intimation on Tax Deduction on Dividend

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  • Communication to Shareholders - Intimation on Tax Deduction on Dividend

    As you are aware that as per the Income Tax Act, 1961, as amended by the Finance Act, 2020, dividends paid or distributed by a Company after April 1, 2020 shall be taxable in the hands of the shareholders. The Company shall therefore be required to deduct tax at source at the time of making the payment of the said Interim Dividend.

    The TDS rate may vary depending on the residential status of the shareholder and the documents submitted to the Company in accordance with the provisions of the Act. The TDS for various categories of shareholders along with required documents are provided in Table 1 and 2 below:

    able 1: Resident Shareholders

    Category of Shareholder Tax Deduction Rate Exemption Applicability/ Documents required
    Any resident shareholder 7.5% Update the PAN if not already done with depositaries (in case of shares held in demat mode) and with the Company's Registrar and Transfer Agents – Link Intime India Private Limited (in case of shares held in physical mode).

    ·No deduction of taxes in the following cases - If dividend income to a resident Individual shareholder during FY 2020-21 does not exceed INR 5,000/-,
    ·If shareholder is exempted from TDS provisions through any circular or notification and provides an attested copy of the PAN along with the documentary evidence in relation to the same.
    Submitting Form 15G/ Form 15H NIL Eligible Shareholder providing Form 15G (applicable to an Individual below the age of 60 years) / Form 15H (applicable to an Individual above the age of 60 years) - on fulfilment of prescribed conditions. Please refer attached format
    Order under section 197 of the Act Rate provided in the order Lower/NIL withholding tax certificate obtained from Income Tax authorities.
    Insurance Companies: Public & Other Insurance Companies NIL Self-declaration that it has full beneficial interest with respect to shares owned, along with self-attested copy of PAN card and registration certificate
    Corporation established by or under a Central Act which is, under any law for the time being in force, exempt from income- tax on its income. NIL Documentary evidence that the person is covered under section 196 of the Act.
    Mutual Funds NIL Documentary evidence that the person is covered under section 196 of the Act.
    Alternative Investment fund NIL Documentary evidence that the person is covered by Notification No. 51/2015 dated 25 June 2015.
    Other resident shareholder without PAN/Invalid PAN 20%
    Please Note that:
    a) Recording of the valid Permanent Account Number (PAN) for the registered Folio/DP id-Client Id is mandatory. In absence of valid PAN, tax will be deducted at a higher rate of 20% as per Section 206AA of the Act.
    b) Shareholders holding shares under multiple accounts under different status / category and single PAN, may note that, higher of the tax as applicable to the status in which shares held under a PAN will be considered on their entire holding in different accounts.

    Table 2: Non-resident Shareholders
    Category of Shareholder Tax Deduction Rate Exemption Applicability/ Documents required
    Any non-resident shareholder 20% (plus applicable surcharge and cess) or Tax Treaty rate whichever is lower Non-resident shareholders may opt for tax rate under Double Taxation Avoidance Agreement ("Tax Treaty"). The Tax Treaty rate shall be applied for tax deduction at source on submission of following documents to the company
    ·Copy of the PAN Card, if any, allotted by the Indian authorities.
    ·Self-attested copy of Tax Residency Certificate (TRC) valid for the year 2020-21 obtained from the tax authorities of the country of which the shareholder is resident
    ·Self-declaration in Form 10F in the attached form.
    ·Self-declaration confirming not having a Permanent Establishment in India, eligibility to Tax Treaty benefit and do not / will not have place of effective management in India. (format attached herewith).
    TDS shall be recovered at 20% (plus applicable surcharge and cess) if any of the above-mentioned documents are not provided.
    The Company is not obligated to apply the Tax Treaty rates at the time of tax deduction/withholding on dividend amounts. Application of Tax Treaty rate shall depend upon the completeness of the documents submitted by the non-resident shareholder and are in accordance with the provisions of the Act.
    Foreign Institutional Investors, Foreign Portfolio Investors (FII, FPI) 20% (plus applicable surcharge and cess) None
    Submitting Order under section 195(3) /197 of the Act Rate provided in the Order Lower/NIL withholding tax certificate obtained from Income Tax authorities.
    Note: The Shareholders holding shares under multiple accounts under different status / category and single PAN, may note that, higher of the tax as applicable to the status in which shares held under a PAN will be considered on their entire holding in different accounts

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