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Sonata Software Limited has issued a communication to its shareholders regarding Tax Deduction at Source (TDS) on the interim dividend for Financial Year 2026-27. The Board declared an interim dividend of ₹1.25 per equity share on 6 August 2026. While the dividend amount itself is routine, the accompanying TDS notice marks one of the first clear, practical signals from a listed company that the old Forms 15G and 15H are no longer accepted.

Under the Income-tax Act, 2025 and the Income-tax Rules, 2026 (both effective from 1 April 2026), a single new form — Form 121 — has replaced the earlier dual system of Form 15G and Form 15H.

Why This Notice Matters

The Sonata communication explicitly states that individual shareholders seeking nil TDS on dividend income must now submit Form 121. Any declaration in the old 15G or 15H format will not be accepted for Tax Year 2026-27. This is not a company-specific preference; it is a statutory requirement under the new law.

Key points from the notice:

• Dividend is taxable in the hands of shareholders.
• TDS will be deducted at applicable rates unless valid exemption documents are submitted.
• Documents (including Form 121) must be uploaded on the KFin Technologies portal by 13 August 2026.
• The threshold of ₹10,000 total dividend in the tax year for nil TDS (subject to valid PAN) continues to apply for resident individuals.

What Exactly is Form 121?

Form 121 is a self-declaration under Section 393(6) of the Income-tax Act, 2025 (read with Rule 211 of the Income-tax Rules, 2026). By submitting it, a resident individual or HUF declares that their estimated total income for the tax year will result in nil tax liability. On the basis of a valid Form 121, the company is not required to deduct TDS on the dividend.

Major changes from the old system:

Aspect	Old System (pre-1 April 2026)	New System (from 1 April 2026)
Forms	Form 15G (below 60) + Form 15H (60+)	Single Form 121
Age distinction	Yes	No
Applicable to	Resident individuals & certain others	Resident individuals & HUFs
Governing law	Income-tax Act, 1961	Income-tax Act, 2025
Validity	Assessment Year based	Tax Year based

Companies, firms, and non-residents remain ineligible to use Form 121.

Practical Impact for Sonata Shareholders

1. Resident individuals with low or nil tax liability must download and submit Form 121 (along with a copy of PAN) through the KFin portal if they want to avoid TDS.
2. Shareholders whose total dividend from Sonata (and possibly other companies) stays within the ₹10,000 limit and who have a valid, operative PAN linked to Aadhaar may still escape TDS without Form 121.
3. Those without PAN, with invalid/inoperative PAN, or who fail to submit documents on time will face higher TDS (20% in many cases).
4. Non-resident shareholders continue to follow the Tax Treaty route (TRC + Form 41 + self-declaration) if they want beneficial rates.

The notice also reiterates other standard requirements — updating KYC, bank details, and email IDs with the RTA or depository participant — and warns that the company reserves the right to apply higher rates if documents appear incomplete or inconsistent.

Broader Context

This is not an isolated administrative update. The merger of 15G and 15H into Form 121 is part of a larger simplification under the new Income-tax Act, 2025. Similar communications are now appearing from banks, EPFO, mutual funds, and other companies. Taxpayers who earlier filed age-based forms every year will now use one uniform declaration.

Shareholders should treat the 13 August deadline seriously. Once TDS is deducted at a higher rate, the only remedy is to claim a refund while filing the return of income — a process that takes time and blocks cash flow.

Action checklist for Sonata shareholders:

• Check your total expected dividend income for Tax Year 2026-27.
• Confirm whether your PAN is operative and linked to Aadhaar.
• If eligible for nil TDS, download Form 121, fill it carefully, and upload it on the KFin portal before the deadline.
• Keep a copy of the submitted form and the Unique Identification Number (UIN) that the company/RTA will allot.

The Sonata notice is a timely reminder: the new tax framework is no longer theoretical. It is operational, and companies are already enforcing Form 121 as the only acceptable declaration for nil TDS on dividends.