Dividend income is the best income to live a life like tension free because it give us freedom of money. Everyone enter into stock market and learn about trading and investing but very few understand the power of it means dividends.
But first of all what is dividends ? who pays dividend ? how much dividend one can receive ? how much dividend is taxable ? many questions arises on your mind let me try to explain one by one.
What is dividend income ?
Dividend are paid by company to shareholders who hold share for long term. Investor buy shares of company and believe that company will grow in future and become large cap that’s why investor invest into it. Dividend is a second source of income for investor their main income by share price appreciation.
What is the real meaning of share price appreciation ? share price appreciation means share goes upward in price so investor’s earn profits in their investment value. Which company usually prefer dividend ? Those who saw less growth in their company then they have extra cash in their sheet that’s why they share profit in the form of dividend.
At a time how many company give you dividend ? Their is no limit you will receive all company’s dividend at a time because one company not depend on each other. You at a time become shareholder of many company’s.
How to receive dividend income ? For getting this you need one bank account this bank account is already register with your broker no manual work you need to do. Suppose you buy TCS share so TCS directly send this amount to your bank account broker was no in this.
Tax on dividend income ?
If you earn 5000 rupees from one company then you will have to pay 15 percent tax on it other wise you will be taxable as on your income slab. if you earn 10000 then you will have to pay 500 tax on it. Before 2018 no need to pay tax on income but after 2018 government change rules.
If you only have dividend income then you don’t need to pay tax up to 500,000 lakh in this financial year. Only salaried income have higher tax .
Some important points about dividend income ?
1. Dividend yield :- It is the percentage of amount as compared to face value let me explained in detail. If any company have face value 1 and share price 1000 and they give 1000 rupees in dividend so its yield is 1 percent that’s how simple it is. Yield gave you how much money company pays to investor as compared to price.
If any company have more than 2 percent yield then check financial report because some company have bad financial condition but they also give high dividend to attract investors. so aware about it.
When some have less dividend yield then company was in growth phase because if company not giving big chunk of dividend.
2. Ex date :- Many people was always in doubt about ex date they try to understand but can’t because its very confusing. Why Ex date is so important ? It is the date one day before record date means if you buy shares at ex date then you will receive dividends otherwise you will not. So always try to buy before ex date.
Why dividend is not good for company ?
Some people think company give profits to me that’s is best source of income but most time dividend is not good. Dividend is only best for long term investors because they hold shares and by time passes dividend amount also increases. But for those who want to earn quick money from this some times they fall into trouble. If they bought shares for dividend and shares fall 5 percent then dividend amount is credited but loss was in appreciation.