Currently under Section 10(34), any dividend, on which Dividend Distribution Tax is paid by the Company under Section 1150, are exempt in the hands of the recipient.
It is proposed to tax the dividends received from the domestic company by individual, HUF or Firm, who are resident in India. The dividends received by individual, HUF or Firm, who are resident in India from the domestic company, shall be taxed at the rate of 10% in excess of Rs. 10 lakhs.
However, it shall be noted that no deduction in respect of any expenditure or set off of any loss would be allowed in computing such dividends in the hands of recipients.
For example, if the total dividend received by a resident Individual is Rs 15 lakhs, tax shall be levied only on Rs 5 lakhs i.e. dividends in excess of Rs 10 lakhs
These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.