I-T Dept may soon tax share buybacks as long-term capital gains: Report

Sep 12, 2017 03:35 PM IST | Source: Moneycontrol.com

A news report says that the Central Board of Direct Taxes is looking to exclude share buybacks from the tax exemption currently enjoyed by them

Moneycontrol News 

Share buybacks have gathered momentum since last year after the government imposed an additional 10 percent tax on dividends for all individual shareholders.Many believe that buybacks have emerged as a tax-efficient alternative to dividend payouts.

Most likely this surge in buyback has not gone unnoticed by the tax department, which is now looking at ways to collect long-term capital gains tax (LTCG) on buybacks. Business Line reports that the Central Board of Direct Taxes (CBDT) is looking at ways to exclude share buybacks from the exemption currently enjoyed by them.

A source privy to the development told the newspaper that the Mumbai tax department has sent a  note to CBDT seeking clarity on the same.Data collected by BusinessLine shows that share buybacks worth Rs 34,000 crore were announced by Indian companies last year. So far this year, the amount has already exceeded Rs 36,000 crore, including the recent Infosys offer, the newspaper reported.

Prime Minister Narendra Modi had earlier said that he favours higher taxes from market participants."The low contribution of taxes may be due to the structure of our tax laws. Low or zero tax rate is given to certain types of financial income," he had said last year.