Reporting Dividends from Multiple Demat Accounts in ITR
- PRITI SIRDESHMUKH
- Jul 24
- 8 min read
Filing Income Tax Returns (ITR) can be a complex task, especially when dealing with multiple income sources such as dividends. Many taxpayers hold shares across various Demat accounts, making it challenging to manage and report the dividend income accurately. In this detailed guide, we’ll walk through how to report dividends from multiple Demat accounts correctly, ensuring that all the necessary data is captured for accurate tax filing. Let us understand where to report dividend income in the ITR, how to calculate TDS on dividends, and other important details you need to be aware of when reporting this specific type of income.
Table of Contents
Reporting Dividends from Multiple Demat Accounts
If you hold shares in multiple Demat accounts, each account may generate dividend income, which must be reported separately in your Income Tax Return (ITR). The dividend income from all accounts must be consolidated and reported under the appropriate section in the ITR form. The key point here is to ensure that all dividend income, no matter which Demat account it is from, is accurately included in your return. Any discrepancy in reporting may result in penalties, interest, or scrutiny from the tax authorities. Therefore, it's essential to keep track of dividends received across accounts and include them in your filing.
Collect All Dividend Data Across Accounts
To report your dividend income correctly, the first step is to gather all the relevant data from each of your Demat accounts. Most banks and financial institutions provide consolidated statements at the end of the financial year, which list the dividends credited to your account, along with the amount of tax deducted at source (TDS), if any. If you receive dividends directly into your bank account, the bank statement will also reflect the credited dividend. Ensure that you collect data for the entire financial year (April 1 to March 31), as this will be needed when filing your return.
Where to Report Dividend Income in the ITR
In the ITR form, dividend income must be reported under "Income from Other Sources." This section includes various types of income like interest, rental income, and dividends. For taxpayers filing under the old tax regime, you will find the relevant section in Schedule OS of the ITR form. Under this section, you will report the total dividend income you received during the financial year. If you have received dividends exceeding ₹5,000 from any company, you need to include this income under the correct heading, ensuring it is accurately included for tax purposes.
Reporting the Gross Dividend Amount
When reporting your dividend income, it’s important to mention the gross dividend amount. This means you should report the total amount of dividends before TDS (Tax Deducted at Source) is applied. Even if TDS has been deducted on your dividends, the gross amount must be shown as part of your income. After reporting the gross dividend amount, you can then adjust for the TDS, which will be mentioned in the TDS section of your ITR.
TDS on Dividends
Tax Deducted at Source (TDS) is applicable on dividends paid by domestic companies if the amount exceeds ₹5,000 during the year. The TDS rate is typically 10% on dividend income exceeding ₹5,000, though it may vary depending on the type of shareholder (resident or non-resident). Ensure that the TDS amount is reflected in your Form 26AS, a consolidated statement that shows all the taxes deducted on your behalf. While filing your return, you will need to enter the TDS amount under the relevant section of your ITR form to claim a refund or set it off against your total tax liability.
Deduction for Interest Expense
If you have incurred any interest expenses related to the funds used to acquire shares that generate dividend income, you may be eligible to claim a deduction for those expenses. This deduction can be claimed under section 57 of the Income Tax Act, provided the interest paid is on loans taken for investing in shares or securities. The interest expense is allowed as a deduction only if the loan was specifically used to generate taxable income, like dividends or capital gains. Keep in mind that this deduction will be available only after the gross dividend income has been reported.
Reconciling Multiple Accounts
Reconciling dividend income from multiple Demat accounts can be a bit tricky, especially if you have a large portfolio across different brokerage firms. The most important thing is to maintain a detailed record of dividends received from each Demat account. This will ensure that you can accurately report your income on the ITR form and match it with your financial statements. You may also receive a consolidated tax statement from your broker or financial institution, which can help simplify the process. Use this information to ensure that all dividend income is reported correctly.
No Need to Attach Dividend Statements
One common misconception about filing ITR is that you need to attach physical copies of your dividend statements or bank statements. However, the ITR form is submitted electronically, and no physical documentation is required to be attached at the time of filing. However, it’s essential to keep all the supporting documents related to your dividend income, such as your dividend statements, Form 26AS, and bank statements, as these may be requested by the Income Tax Department in case of any future queries or audits.
News and Recent Changes
There have been recent changes to the taxation of dividend income, especially following the introduction of the new tax regime. Under the new regime, dividends are taxed in the hands of the individual at applicable income tax rates, and the Dividend Distribution Tax (DDT) that was previously paid by companies has been abolished. Additionally, if your total dividend income exceeds ₹5,000, TDS will be deducted at source, and the rate is expected to be 10%. It’s important to stay updated on these changes to ensure you’re compliant with the latest tax laws. Taxpayers should also be aware that any misreporting of dividend income can lead to penalties or delays in refund processing.
Conclusion
Reporting dividend income accurately is crucial for taxpayers who hold shares across multiple Demat accounts. By consolidating dividend data from all your accounts and ensuring proper reporting in your ITR, you can avoid penalties or delays. Additionally, TDS on dividends, deductions for interest expenses, and reconciliation across accounts must be handled carefully to ensure that your return is error-free. With the tax laws constantly evolving, staying informed about recent changes in dividend taxation is essential. Proper filing of dividend income ensures compliance with tax regulations and helps in maximizing refunds or minimizing tax liability. For anyone looking for assistance in tax filing, it is highly recommended to download theTaxBuddy mobile app for a simplified, secure, and hassle-free experience.
Frequently Asked Question (FAQs)
Q1: Do I need to attach my dividend statements when filing my ITR?
No, you do not need to attach your dividend statements when filing your Income Tax Return (ITR). The Income Tax Department does not require you to physically submit dividend statements. However, it’s essential to keep them handy as the department may ask for them during an audit or if any discrepancies are found in your return. The dividend income should be reported accurately under "Income from Other Sources" in your ITR, and any TDS deductions on this income should be reflected in your Form 26AS.
Q2: How do I report dividends from multiple Demat accounts?
If you have multiple Demat accounts, you need to consolidate the total dividend income from all of them before reporting it in your ITR. Dividend income is reported under "Income from Other Sources," and it is important to aggregate all your dividend income (from all your Demat accounts) into one figure. The total dividend income should be reported in the appropriate section of the ITR form, ensuring accuracy and completeness.
Q3: Can I claim a deduction for interest paid on loans used to invest in shares?
Yes, under Section 57 of the Income Tax Act, you can claim a deduction for interest expenses incurred on loans taken to invest in shares, provided the income generated from these investments is taxable. This typically includes dividend income. The interest expense can be deducted from the total dividend income while filing your ITR, reducing your taxable income.
Q4: How is TDS on dividend income calculated?
TDS (Tax Deducted at Source) on dividend income is generally deducted at 10% if the total dividend income exceeds ₹5,000 in a financial year. This deduction is made by the company before the dividend is paid to you. The deducted TDS is shown in Form 26AS, and you must report both the gross dividend income and the TDS amount while filing your ITR.
Q5: Is dividend income taxable under the new tax regime?
Yes, dividend income is taxable under the new tax regime. It is taxed in the hands of the individual at the applicable income tax rate based on their income tax slab. The Dividend Distribution Tax (DDT) that was previously levied on companies has been abolished, meaning the tax burden now falls on the individual receiving the dividend.
Q6: How do I know if my TDS on dividend income has been deducted?
To verify if TDS has been deducted on your dividend income, you can check Form 26AS, which is a consolidated tax statement that shows all taxes deducted at source for a given financial year. This form is available on the Income Tax Department’s e-filing portal, and it will show the TDS deducted by the company paying the dividend.
Q7: What should I do if my dividend income exceeds ₹5,000?
If your dividend income exceeds ₹5,000 in a financial year, TDS will be deducted at a rate of 10%. You must report the total gross dividend income and the TDS deducted in your ITR. This TDS amount can be adjusted against your total tax liability when filing your return, reducing the amount of tax you owe. Ensure to reflect the correct dividend income and TDS amount to avoid discrepancies.
Q8: Can I receive dividends in my bank account instead of my Demat account?
Yes, many companies deposit dividends directly into your registered bank account linked to your Demat account. It's important to monitor both your Demat and bank accounts for dividend payments. The dividend income will still be reported as income, regardless of whether it is received in your Demat or bank account.
Q9: What is the tax rate on dividend income?
Under the new tax regime, dividend income is taxed based on the individual’s applicable income tax slab. The tax rate will depend on your total taxable income, which includes dividend income. If you are in a higher income bracket, your dividend income will be taxed at a higher rate. It is important to include all sources of income, including dividends, when calculating your total taxable income.
Q10: What if I forget to report dividend income?
If you forget to report dividend income in your ITR, you can file a revised return before the end of the assessment year. Filing a revised return will allow you to correct the omission and avoid penalties for underreporting income. It is always best to ensure that all income, including dividends, is accurately reported to avoid scrutiny or delays in refund processing.
Q11: How do I calculate the total dividend income across multiple Demat accounts?
To calculate the total dividend income across multiple Demat accounts, you need to add the dividend income from each account. This can be done by checking your account statements or Form 26AS. Ensure the total dividend income from all sources matches the figures shown in your financial documents. This total should be reported under "Income from Other Sources" in your ITR.
Q12: Can I adjust the TDS on dividend income against my total tax liability?
Yes, you can adjust the TDS deducted on your dividend income against your total tax liability when filing your ITR. The TDS will be reflected in your Form 26AS, and you can claim it while filing your return. This helps reduce your overall tax burden, as the amount of tax already paid through TDS will be subtracted from the total tax you owe. This ensures that you do not pay tax on the same income twice.
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