Tax on distributed income of domestic company for buy-back of shares (WIDENING AND DEEPENING OF TAX BASE AND ANTI-AVOIDANCE)

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..... income of a domestic company from buy-back of shares were introduced by Finance Act, 2013, in line with the then schema of dividend distribution tax. Prior to the amendments made by the Finance Act, 2020, a company had to pay dividend distribution tax (DDT), on the distributed profits by way of dividends in addition to the income-tax chargeable in respect of the total income for any assessment ye .....

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..... n the hands of shareholders, who received payment from such buy-back of shares and shall be charged to income-tax at applicable rates. No deduction for expenses shall be available against such dividend income while determining the income from other sources. The cost of acquisition of the shares which have been bought back would generate a capital loss in the hands of the shareholder as these asset .....

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..... n Rs. 4000/- 20 shares bought back in 2024 @Rs. 60/- per share Income taxable as deemed dividend Rs. 1200/- Capital loss on such buyback (Rs. 40 *20) Rs. 800/- 50 Shares sold in 2025 @Rs. 70 per share Capital Gain (3500 - 2000) Rs. 1500 Chargeable capital gain after set off Rs. 700 5. These amendments will take effect from the 1st day of October, 2024, and will accordingly apply to a .....

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