TDS (Tax Deducted at Source) is a mechanism where the payer of income deducts tax at the source — before making the payment — and remits it to the government on behalf of the recipient. The recipient then claims credit for TDS against their total tax liability when filing their ITR.
TDS on unlisted-share transactions
| Transaction | TDS rate | Threshold | |---|---|---| | Dividend from unlisted company | 10% | > ₹5,000/year | | Buyback consideration | Effective tax at company level; no shareholder TDS | — | | Capital gains (sale proceeds) | No TDS for residents | — |
There is generally no TDS on capital gains from the sale of unlisted shares by resident Indians — you declare and pay the tax yourself in your ITR. Non-residents may face TDS under Section 195.
Why it matters for unlisted shares
If an unlisted company pays you a dividend, TDS at 10% will be deducted before you receive the cash. You get a TDS certificate (Form 16A) and can claim this against your tax liability. Your effective tax will be at your slab rate, with TDS as an advance payment.
Example: ₹20,000 dividend from an unlisted NBFC → TDS of ₹2,000 deducted. You file an ITR and either owe more tax (if slab > 10%) or get a refund (if your total tax is lower).