FM exempts cos that announced a buyback before July 5 from buyback tax

Finance Minister Nirmala Sitharaman on September 20 said listed companies that had announced a buyback prior to July 5 will be exempted from the buyback tax.

This is a huge positive for companies like Infosys and Wipro that had announced a buyback prior to the Union Budget announcement on July 5.

Both companies had announced buyback prior to the Budget. Wipro and Infosys had announced a buyback of Rs 10,500 crore and Rs 8,260 crore, respectively. At 20 percent, the buyback tax for both companies would have meant an outgo of  Rs 2,100 crore and Rs 1,652 crore, respectively.

The government had decided to rollout a buyback tax to discourage the practice of avoiding Dividend Distribution Tax (DDT). The latter is to be paid by companies who distribute their profits to shareholders in the form of dividends.

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