Union Budget 2025: Govt’s Big Surprise For Investors, TDS Threshold For Dividend Income Hiked - Check Details

The Union Budget for 2025 was presented in the Parliament on Saturday, February 1. The presentation of the Budget was keenly watched by people from all walks of life.

As a part of the Union Budget for 2025, several key taxation-related changes were announced. While the Budget surprised the salaried class with the announcement of the revised income tax slabs and the increased tax rebate amount, investors too got a gift in FM Sitharaman’s budget speech.

In Modi 3.0’s second Union Budget, the government increased the Tax Deducted at Source (TDS) limit for dividend income. The limit was increased from Rs 5,000 to Rs 10,000 for one financial year. However, taxpayers must note that the TDS limit applies to dividends earned from one stock or mutual fund and not the total dividend income earned by the investor.

The new TDS limit of Rs 10,000 is applicable to the dividend income earned by individual shareholders and the units of a mutual fund.

Before the revision of the TDS limit, companies that provided a dividend on their shares were required to deduct Tax Deducted at Source (TDS) of 10 per cent on dividends of more than Rs 5,000 in a financial year. The move can potentially boost stock market and mutual fund investments as it would reduce the tax liability of investors and put more money in their hands by way of increased dividend income.

Let’s understand this with an example:

If A earned a dividend income of Rs 8,000 before the increase in the TDS threshold. He would receive a total dividend of only Rs 7200 as 10 per cent of the dividend (Rs 800) would be deducted as TDS by the company.

After the increase in the TDS limit, the total amount of money received by A as a dividend will be Rs 8000 since it is less than the Rs 10,000 threshold.

Notably the 10 per cent TDS is applicable only when the recipient of the dividend has provided their PAN details. If the dividend’s recipient has not provided valid PAN details the TDS deducted is 20 per cent of the dividend income.