The Union Budget 2023 is two weeks away and one of the requests is that amendments to the buyback tax should be considered by the finance minister. A sub-group set up by market regulator SEBI to review the buyback framework recently suggested making the levy fairer. Currently, the tax is paid by the corporate entity at a rate of about 20% for both listed and unlisted companies.
In 2019, when the amendments were made, the government noticed abuse of the provisions when companies would choose to distribute surplus profits via buybacks instead of paying dividends to their shareholders. The tax arbitrage was possible since the tax rate for capital gains to be paid by the shareholders was lower than the Dividend Distribution Tax, which was payable by the company.
Subsequently, in 2020, the government amended the income tax law to shift the dividend distribution levy from the company into the hands of the shareholders. No doubt, the issue of buyback tax is thus a very relevant and debated one.
BQ Prime has authored an article on buyback tax, in which they have sought Economic Laws Practice (ELP)’s partner, Rahul Charkha’s views.
Read the article here to know more: http://bit.ly/3kyxYyM