Buyback tax rules inequitable: Industry

Experts argue the new tax rate is disproportionately higher compared to LTCGT of 12.5% and STCGT of 20%

- MONIKA YADAV

INDUSTRY representatives have recently submitted representations to the finance minister, urging a reconsideration of new taxation rules concerning the buyback of shares. The 2024 Union Budget imposed up to a 39% tax on shareholders who sell their shares back to the companies, treating this transaction as dividend income.

Previously, companies would face a buyback tax of 23%, but new provisions have shifted tax burden onto individual shareholders, which the industry claims to be unfair and inequitable. Experts argue new tax rate is disproportionately higher as gainst long-term capital gains tax (LTCGT) of 12.5% and short term capital gains tax (STCGT) of 20%, which apply when shares are sold to other buyers.