New Tax Rules for Buy-Back of Shares by Domestic Companies

The Indian government has revised tax regulations for the buy-back of shares by domestic companies, effective from July 5, 2019. Under the new rules, any income arising from the buy-back of shares by companies listed on recognized stock exchanges will now be taxed at 20%, similar to the tax on unlisted companies. Previously, only unlisted companies were subject to this tax. The move aims to curb tax avoidance practices where companies opted for buy-backs over dividends due to favorable tax treatment. The change aligns the tax treatment of buy-backs for both listed and unlisted companies, ensuring a more equitable tax framework.