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Sonata Software Limited has issued a detailed communication to its shareholders regarding Tax Deduction at Source (TDS) on its interim dividend of ₹1.25 per equity share for the Financial Year 2026-27. The Board declared this dividend at its meeting on 6 August 2026, with the record date fixed for 14 August 2026.

What makes this notice noteworthy is not just the dividend itself, but the legal framework it operates under. The company has explicitly referenced the Income-tax Act, 2025 and the new Form 121, marking a clear real-world application of the reformed tax regime that came into force on 1 April 2026.

The Big Shift: Form 121 Replaces 15G and 15H

Under the old Income-tax Act, 1961, resident individuals with nil tax liability used Form 15G (for those below 60 years) or Form 15H (for senior citizens) to request non-deduction of TDS on interest, dividends and certain other incomes.

From Tax Year 2026-27 onwards, those two forms have been abolished. A single consolidated declaration — Form 121 — has taken their place under Section 393(6) of the Income-tax Act, 2025, read with Rule 211 of the Income-tax Rules, 2026.

Form 121 is a self-declaration by a resident individual or HUF stating that the estimated tax on their total income for the tax year will be nil. Once accepted by the payer (in this case, the company or its RTA), no TDS is deducted on the specified income.

Sonata’s notice clearly states that old Forms 15G/15H will not be accepted for Tax Year 2026-27 and that shareholders must submit the new Form 121.

Key TDS Rules Highlighted in Sonata’s Communication

For Resident Shareholders:

• No TDS if total dividend from the company in Tax Year 2026-27 does not exceed ₹10,000 (subject to valid PAN).
• Standard rate: 10% if valid PAN is available and no exemption is claimed.
• Higher rate: 20% if PAN is missing, invalid or inoperative (including cases where PAN is not linked with Aadhaar, as required under the new law).
• Nil rate possible by submitting Form 121 (along with self-attested PAN) if the individual meets the eligibility conditions (primarily nil tax liability for the year).

Other categories covered in the notice include entities eligible under specific provisions of Section 393, Alternative Investment Funds, and non-residents (who can claim beneficial tax treaty rates by submitting Tax Residency Certificate, Form 41, and related declarations).

Shareholders have been asked to upload the required self-attested documents on the KFin Technologies portal (https://ris.kfintech.com/form15/) by 13 August 2026. Documents received after this date may not be considered.

Why This Matters for Shareholders

This is one of the early listed-company communications that fully operationalises the new Form 121 specifically for an interim dividend belonging to Tax Year 2026-27. While several companies had already started mentioning Form 121 in their final dividend notices for FY 2025-26 (paid in mid-2026), Sonata’s notice is among the first clear signals for the current tax year’s interim payouts.

Practical implications for individual investors:

1. Update your PAN and Aadhaar linkage — An inoperative PAN attracts 20% TDS.
2. Assess your total income before submitting Form 121. The form is valid only if your estimated tax liability for the entire Tax Year 2026-27 is nil.
3. Submit on time — Late submission generally means the company will deduct TDS at the applicable higher rate. You can still claim a refund later by filing your return, but cash flow is affected in the meantime.
4. One form, multiple payers — Form 121 must be submitted separately to each company, bank or institution from which you receive income on which you want to avoid TDS.

Broader Context of the Income-tax Act, 2025

The new Act has renumbered and restructured many provisions. Dividend TDS now falls under Section 393. The threshold of ₹10,000 for nil TDS on dividends for resident individuals continues in substance, but the declaration mechanism and section references have completely changed. Companies are also required to follow new reporting requirements, including allotting Unique Identification Numbers (UINs) to accepted Form 121 declarations and reporting them in the quarterly TDS returns.

What You Should Do Now

If you hold shares in Sonata Software (or any other company declaring dividends around this period):

• Check your registered email for the TDS communication.
• Verify whether your total expected dividend income (across all companies) plus other income keeps your tax liability at nil.
• If eligible, download Form 121 from the Income Tax Department website, fill it carefully, and upload it on the RTA portal before the deadline along with a self-attested PAN copy.
• Ensure your bank account details, email and mobile number are updated with the depository or RTA for smooth credit of the net dividend.

The transition to the Income-tax Act, 2025 is no longer theoretical. Company-level notices like Sonata’s show that the new compliance architecture — especially the unified Form 121 — is now live in day-to-day dividend processing. Shareholders who adapt quickly will avoid unnecessary TDS and the subsequent refund process. Those who ignore the change risk higher withholding and extra paperwork later.