Union Budget 2019: Buyback Tax of 20% Extended to Listed Firms
Presenting her maiden budget, finance minister Nirmala Sitharaman on Friday proposed to extend the buyback tax at 20 percent to listed companies as well.
Finance Minister Nirmala Sitharaman. (PTI)
New Delhi: Presenting her maiden budget, finance minister Nirmala Sitharaman on Friday proposed to extend the buyback tax at 20 percent to listed companies as well.
The step is taken to discourage the practice of avoiding Dividend Distribution Tax (DDT) through buyback of shares by listed companies.
Dividend Distribution Tax is to be paid by companies who distribute their profits to their shareholders in the form of dividends.
"It is proposed to provide that listed companies shall also be liable to pay additional tax at 20 percent in case of buyback of share, as is the case currently for unlisted companies," Sitharaman said the Budget speech.
"Lots of companies especially high payout companies such as Wipro had shifted to do buyback than to pay a dividend. Now, with this taxation, they will be a shift back to dividends. Higher taxation is negative for listed companies," Moneycontrol quoted Abhimanyu Sofat, Head of Research, IIFL Securities Ltd as saying.
There has been no change in the structure of DDT. The current rate of DDT is 15 percent (effective rate of 20 percent once it is grossed up and adjusted with surcharge and education cess). This dividend received is then tax-free in the hands of the shareholders.
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