Circular No. 139

1050. Instructions for deduction of tax at source from dividends during financial year 1974-75 at the rates specified in Part II of First Schedule to Finance Act, 1974

What this is

Circular No. 139 was issued by the Central Board of Direct Taxes on 21 June 1974. Its subject is 1050. Instructions for deduction of tax at source from dividends during financial year 1974-75 at the rates specified in Part II of First Schedule to Finance Act, 1974.

What it does

Gives companies the rates for deducting from dividends in the financial year 1974-75. Section 194 requires the principal officer of an Indian company, or of a company that has made the prescribed arrangements for declaring and paying dividends within India, to deduct before paying any dividend in cash, before issuing a cheque or warrant for it, and before making any distribution or payment to a shareholder of a dividend within sub-clauses (a) to (e) of section 2(22). On the rates in Part II of the First Schedule to the Finance Act, 1974, a resident payee other than a company bears 21 per cent tax with surcharge of 2 per cent; a non-resident payee other than a company bears 30 per cent with 3 per cent surcharge, or tax and surcharge on the slab rates as if the dividend were his total income, whichever is higher; a domestic company bears 22 per cent with 1 per cent surcharge; and a company that is not a domestic company bears 24.5 per cent with 1.225 per cent surcharge.

Why it was issued

The annual instruction to companies on the rate at which dividend distributions of the year are to bear deduction.

Who it reaches

Principal officers of companies declaring dividends in 1974-75
Resident and non-resident shareholders
Corporate shareholders, domestic and foreign
Companies making distributions treated as dividend under section 2(22)

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.2	s.2, s.346, s.355
s.194	s.2, s.393, s.397, s.400, s.402

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

1050. Instructions for deduction of tax at source from dividends during financial year 1974-75 at the rates specified in Part II of First Schedule to Finance Act, 1974
Under section 194, the principal officer of an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India is required before making any payment in cash or before issuing any cheque or warrant in respect of any dividends or before making any distribution or payment to a shareholder of any dividend within the meaning of sub-clauses (a) to (e) of clause (22 ) of section 2, to deduct income-tax thereon at the rates in force. The rates for the financial year 1974-75 specified in Part II of the First Schedule to the Finance Act, 1974 are as follows :

Income-tax

Surcharge

I.

In the case of a person other than a company—

(a) where the person is resident

21 per cent

2 per cent

(b) where the person is not resident in India

30 per cent

3 per cent

or

income-tax and surcharge on income-tax in respect of the income at the rates prescribed in sub-paragraph I of paragraph A of Part III of the First Schedule to the Finance Act, 1974, if such income had been the total income,

whichever is higher.

II. In the case of a company—

(a)

where the company is a domestic company

22 per cent

1 per cent;

(b)

where the company is not a domestic company

24.5 per cent

1.225 per cent

Circular : No. 139 [F. No. 275/51/74-ITJ], dated 21-6-1974.

What to watch

The rates are those of the Finance Act, 1974 and speak for the financial year 1974-75 only.
Deemed dividends within sub-clauses (a) to (e) of section 2(22) attract the same obligation as a declared dividend, and are the limb usually missed.
For a non-resident individual the company must compare the flat rate with the slab computation and deduct the higher.
The obligation arises before payment or before the warrant is issued, so the deduction cannot wait for encashment.

Where you meet it

In an old dispute over deduction on a dividend or a deemed dividend of 1974-75, or in a shareholder's claim for credit.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 89/2026-CBDT [F. No. 164/1/2026-ITA-1] / SO 3936(E) — Ministry of Finance 17 July 2026
Notification No. 75/2026 [F. No. 275/18/2026-IT(B)] / SO 3610(E) : TDS Exemption on Ship Lease Payments to IFSC Units — 4 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 3 July 2026
Notification No. 74/2026 [F. No. 275/16/2026-IT(B)] / SO 3609(E) : TDS Exemption on Aircraft Lease Payments to IFSC Units — 4 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 3 July 2026
Notification No. 65/2025 [F. No. 300196/4/2019-ITA-I] / S.O. 2739(E) — Ministry of Finance 19 June 2025
Notification No. 56 /2025 [F.No.300164/4/2024-ITA-1] / SO 2576(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 12 June 2025
Notification No. 52/2025 [F. No. 300164/5/2024-ITA-1] / SO 2447(E) — Ministry of Finance 30 May 2025

← Circular No. 140 · Circular No. 138 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.