Tax effect on Buyback of shares effective from 1st October 2024

Oct 15, 2024

The Finance Act (No. 2), 2024, introduces major changes to the tax treatment of share buybacks, effective from October 1, 2024. Key updates include:

• Shift in Tax Responsibility: Shareholders will now bear the tax burden on buybacks, which will be treated as dividend income.
• TDS Obligations: Companies must deduct TDS on buyback proceeds (10% for residents, applicable rates for non-residents).
• Capital Loss: Shareholders can offset future gains by carrying forward capital losses on buybacks for up to 8 years.

For companies, this means no more 23.296% tax on buybacks, but they must manage TDS compliance.

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