Mutual fund, stock investors alert! Govt raises TDS limit on dividend income from ₹5,000 to ₹10,000 | Stock Market News

In a piece of good news for the stock market investors, the Narendra Modi government announced a proposal to raise the tax deducted at source (TDS) limit on dividend income in the Union Budget 2025-26 from ₹5,000 to ₹10,000.

The move, which comes as part of TDS threshold rationalization, is a boost to both stock market and mutual fund investors as it would reduce their tax liability.

“The Union Budget 2025 has raised the TDS limit on dividend income from stocks and mutual funds from ₹5,000 to ₹10,000. Now, if an investor’s dividend income from one stock or mutual fund exceeds ₹10,000, a 10 per cent TDS will be applicable,” said Pankaj Mathpal, MD & CEO at Optima Money Managers.

However, one must note that the limit is for one stock or mutual fund, not the addition of all dividend incomes from one’s stock investments or all mutual fund investments, added Mathpal.

TDS Limit of Dividend Income

Let’s understand this by way of an example.

1. Assuming an investor Mr A earns a dividend income from a particular stock of ₹9,000 in a year, then under the new proposed TDS limits, no amount will be deducted from the dividend amount received by him. However, under the older threshold, the company would have deducted a TDS@10% of ₹900 and the investor would have received ₹8,100 in his account.
2. Now, assuming another investor Mr B receives a dividend of ₹11,000 from a company, then under the new proposal, the TDS will be deducted at the rate of 10%, which comes to ₹1,100. Therefore, the investor would receive ₹9,900 in his account.

Tax Relief In Budget

The Budget offered a bonanza to the Indian middle class by tweaking tax rates. Finance Minister Nirmala Sitharaman announced making income up to ₹12 lakh tax-free from ₹7 lakh earlier.

“The Budget has raised the tax exemption limit to 12 lakhs and has also revised & rationalized the slab rate structure under the new tax regime. This is clearly the right direction to incentivize tax payers as we gradually adopt the new regime. Also, this will significantly push the disposable incomes in the hands of the middle-class salaried taxpayers. This will go a long way in driving consumption across sectors especially real estate in the affordable and mid segment,” said Vimal Nadar, Head of Research at Colliers India.

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