I understand that, during share rental period, if the stock goes ex-dividend, the borrower gets the dividend, and the broker then transfers the dividend to me (the lender).
My question is: suppose the borrower gets over 10k dividend, the company will deduct TDS (this must be quite common as one use of SLMB is cash carry arb, and lot size is big).
How is this TDS handled? It is the borrower’s name that appears in form 26AS. How will the TDS be transferred to me (the lender)?
Upping this again as another broker (that has SLBM) gave an unexpected answer: the lender loses 10% of dividend in TDS cases.
This makes SLBM risky as in old holdings, dividend yields are much higher compared to rent. Zerodha may want to make this clear to users who may not know this risk and will wonder where the 10% of their dividend went.
Also I’m surprised that this point is not handled. Is this a ‘known’ NSCCL issue? Can it be raised or something be done to fix this?
In case of stock lending, the comapny pays dividend to the borrower and hence the TDS is also deducted against the PAN of borrower and reflected in 26AS of the borrower only.
However, there is no legally implicated rule to transfer this TDS credit to lender.