look news india
Ahmedabad: New tax rules on share buyback were announced in the full-time budget of Modi 3.0 presented on July 23. The new rules will come into effect from October 1. After the new tax rules, companies are scrambling to buy back shares and so far 16 companies have announced buybacks worth an estimated Rs. 4500 crore.
Telecom major Indus Towers has invested Rs. 2640 crore and announced a share buyback plan. Apart from this, AIA Engineering has invested Rs. 500 crore, Welspun Living has announced spending Rs. 278 crore on share buyback. Apart from this, TTK Prestige, Cera Sanitaryware and Navneet Education also received Rs. 7 crore to Rs. 200 crore buyback plan has been presented. Experts say that after the new tax rules come into force, investors participating in the buyback will have to pay more tax.
Finance Minister Nirmala Sitharaman has directed to impose tax on the income from share buyback in the budget. Currently, companies pay 20 percent tax on share buyback.
The investor does not have to pay any tax. After the new rules come into force, companies will not deduct tax. The investor will have to pay tax on the income from buyback as per his tax slab. Investors can claim capital loss on the price of buyback shares. Apart from this, it can be adjusted with capital gains for the next 8 years.
Experts say that the change in rules in the Union Budget will increase the tax burden. It is unfair to tax buyback income as its purpose is to return excess capital to investors. However, there was a difference between dividend and buyback from the tax point of view, due to which companies gave priority to buyback. The government has bridged this gap in the budget.
Share buyback of Rs 1.5 lakh crore in 5 years
Companies widely use the method of share buyback to enable shareholders to share in the profits. The share buyback program gives the investor an opportunity to sell shares at a higher price than the market price. According to Prime Database, in the last five years, companies have spent about Rs 50 crore. Shares worth 1.5 lakh crore have been bought back. The highest amount of Rs. 55,743 crore was bought back in 2017. The year 2023 was the second year in this case, when companies spent Rs 200 crore. Rs 48,452 crore were bought back.
