New rules for share buyback are coming into effect from October 1

New Delhi. In the Budget 2024 speech, Finance Minister Nirmala Sitharaman had said that a new tax system is going to be implemented on share buyback. The new rules ( Share Buyback Rules) will come into effect from October 1, 2024. Under the new rules, if an investor benefits from share buyback, it will be considered as a dividend .

Now tax will be levied on the basis of dividend. Capital gain or loss will be calculated based on the amount received by the shareholder in the share buyback.

New rules were announced in the budget

In the Union Budget (Union Budget 2024) presented in July this year, the Finance Minister had proposed to impose tax on the income from buyback of shares. Under this, the income from repurchase of shares will be treated as dividend. Under this new tax system, share buyback will be considered as additional income of the company and tax will be levied on it (Tax on Share Buyback).

Will investors make a profit or loss?

The new rules for share buyback can bring both advantages and disadvantages for investors. Siddharth Maurya, Founder and Managing Director of Vibhavangal Anukulkara Private Limited, said that under the new rules, companies will have to follow more transparency and rules in the buyback process. This will benefit investors as they will get more clarity on how companies are doing buyback and what impact it will have on their investment.

Siddharth Maurya also said that due to these rules, companies may take more time to process buybacks. This may reduce the possibility of quick gains on share prices, which may be detrimental for investors who want to make quick profits. Apart from this, companies may also have to bear additional compliance costs, which may affect their profits.

This means that the new rules will bring long-term protection and transparency to investors, but may also pose some challenges from a short-term investment point of view. These rules may prove to be positive for long-term investors, while investors expecting immediate profits may face some problems.