Infosys share buyback: Will you get Rs 1,800 or just Rs 1,620? The whole game is hidden in taxes!:

News Topical, Digital Desk : IT sector company Infosys has announced a share buyback of Rs 18,000 crore. This will benefit 26 lakh shareholders. But, it is important for investors to understand how this buyback will be taxed. Earlier the company used to pay tax, but now under the new rules, the amount received from the buyback is considered as dividend income of the shareholders.

According to the new rules, the entire amount received from the buyback is subject to dividend tax. Infosys will deduct 10% TDS (Rs 180 per share) on this. The company will not have to pay any other tax.

Shareholders will have to pay tax according to their income tax slab (20% or 30%). Also, the cost of buying shares will be considered a capital loss. It can only be adjusted with other capital gains, not with dividend income.

How much will you get?

Infosys' buyback offer is Rs 1,800 per share. After deducting 10% TDS (Rs 180), investors will get Rs 1,620 per share. But tax will be levied on the entire amount of Rs 1,800.
An investor in 20% tax slab will have to pay Rs 360 as tax.
Those in the 30% tax slab will have to pay Rs 540 as tax.
Who benefits, who loses?
Benefit for small investors: This buyback is beneficial for investors who have low income or who fall in the lower tax slab. They will have to pay less or no tax and they can adjust the capital loss with other gains in the future.
Challenge for big investors: Investors in higher tax slabs (20% or 30%) will have to pay more tax and will get the benefit of capital loss only if they have other capital gains.