IndiaFilings
Expert
Published on: Mar 28, 2026
Dividend Income from Foreign Company
Dividend income which is received from a foreign company is fully taxable in India as per the Income Tax Act. On the other hand, dividend received from an Indian company that was subject to dividend distribution tax is exempt from tax according to Section 10(34). However, according to Section 115BBDA, which is applicable to resident individual or HUF or firm, the dividend received shall be chargeable at the rate of 10%. The section shall apply only if the aggregate amount of dividend received from a domestic company during the year is in excess rupees ten lakhs. In this article, we review the tax treatment for dividend received.What is Dividend Income?
A dividend is inclusive of the following payments or distribution of a company’s accumulated profits:- Any distribution which involves the release of all or any part which relates to the company's assets
- Any distribution of debentures, debenture stock, or deposit certificates in any form with or without interest
- Any distribution to its preference shareholders with reference to bonus shares
- Any distribution related to the liquidation of a company with the exception of the shareholder not being entitled to take part in the surplus asset in the case of liquidation
- Any distribution with reference to a company’s reduction of capital of a with the exception of the case of the shareholder not being entitled to participate in the surplus assets in the case of liquidation
- Any payments made in the form of loans or advances that are made by a company in which public are not substantially interested
- Any payment made to the company's shareholder who is the advantageous owner of shares; however, the shareholder shall not hold less than 10% of voting power in the company; further, the payment would not be considered dividend, if it is made in the normal course of business, and money lending is a substantial part of the company’s business
Dividend Income from Foreign Company
Only dividend received from an Indian company is exempt from income tax. Dividend income received from a foreign company is taxable in the hands of the Indian resident. Such dividends received by Indian residents are charged under the category “Income from other sources”. Hence, a dividend that is received from a foreign company will be included in the tax payer’s total income and will be taxable at the income tax rate applicable to the taxpayer.Double Taxation Relief
In case the dividend received by the Indian resident was already taxed, then the taxpayer should consider the provisions of income tax law and the provisions of
Double Taxation Avoidance Agreement (DTAA) entered into with that country. If a dividend received from a foreign company has experienced the burden of double taxation, then the taxpayer can claim double taxation relief according to the requirements of the Double Taxation Avoidance Agreement. Section 91 allows the assessee to claim relief in relation to DTAAs.