Buyback Tax

Since share buyback amount is now taxed at potentially higher individual rates, the post-tax return for shareholders is reduced. This makes buybacks less beneficial as a method of returning capital compared to earlier when the tax burden was borne by the company​

Companies rush to complete buybacks before new tax regime kicks in from Oct 1

After October 1, listed companies may shift their buyback strategies by issuing bonus preference shares or debentures, while unlisted firms could consider restructuring or using LLPs as alternatives to traditional company structures. Dividends may still be less tax-efficient than buybacks, experts say.

Phaseout of buyback tax will complicate matters for companies

The proposed changes to the buyback tax regime are poised to impact both resident and non-resident investors in India. Further, with companies being obligated to withhold tax on distributions made on account buy-back, the compliance burden of such companies would also increase significantly

Are share buybacks going out of fashion?

Part of the reason could be the government’s new policy of taxing share buybacks