Are dividend paying shares always giving tax free returns?

No, all the dividends received by the shareholders are not taxfree.

Dividends above Rs 10 lakhs is taxable to 10%. (Read more here: Economic Times India)

Nevertheless, if you are receiving dividends below Rs 10 lakhs, then you are exempted from paying any tax. The company already pays a ‘dividend distribution tax’ to the government before giving the dividends to its shareholders. Hence, effectively you already paid the tax through the company.

Moreover, to receive dividends greater than Rs 10 lakhs, you need to invest above 2.5 crores (even if we take a high dividend yield of 4% from the stocks). Therefore, if you are a small investor, do not worry much about paying dividend taxes to the government.

I hope it helps. Happy Investing.