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Share buyback new rule: In the Budget 2024 speech, Finance Minister Nirmala Sitharaman informed that a new tax system will be implemented on share buyback. The new rules will come into effect from October 1, 2024. Under the new rules (Share Buyback Rules), if an investor benefits from share buyback, it will be treated as a dividend.
Now tax will be levied on the basis of dividend. Capital gain or loss will be calculated based on the amount received by the shareholder in share buyback.
New rules were announced in the budget
- In the Union Budget 2024 (Union Budget 2024) presented in July this year, the Finance Minister had proposed to impose tax on income from share buyback.
- Under this, the income from the repurchase of shares will be considered as dividend. Under this new tax system, share buyback will generate additional income for the company and will be taxed.
- Regarding these new rules, experts say that this may increase the burden on investors and may also reduce share buyback.
Will investors make a profit or a loss?
- The new rules for share buyback can bring both advantages and disadvantages for investors. Siddharth Maurya, founder and managing director of Vibhavangal Anurupkar Private Limited, said that under the new rules, companies will have to have more transparency and compliance in the buyback process.
- This will benefit investors as they will get more clarity on how companies are doing buybacks and how it will impact their investments.
- Siddharth Maurya also said that these rules may cause companies to take longer to process buybacks. This may reduce the possibility of quick gains in stock prices, which could be detrimental for investors looking for quick profits. Additionally, companies may have to incur additional compliance costs, which could impact their profits.
- This means that the new rules will bring long-term protection and transparency to investors, but may also create some challenges from a short-term investment perspective.
- These rules may prove to be positive for long-term investors, while investors expecting immediate gains may face some difficulty.
