This year, changes in the rules of share buyback were also announced in Budget 2024. In the Budget 2024 speech, Finance Minister Nirmala Sitharaman had said that a new tax system will be applicable on share buyback. The new rules for share buyback will come into effect from October 1, 2024. Let us know in this article whether the new rules will benefit investors or harm them.
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 will come into effect from October 1, 2024. Under the new rule, if an investor benefits from share buyback, it will be considered as dividend.
Now tax will be levied on the basis of dividend. Capital gain or loss will be calculated according to the amount received by the shareholder in the share buyback. New rules were announced in the budget
In the Union Budget 2024 presented in July this year, the Finance Minister had proposed to impose tax on the income from the buyback of shares. Under this, the income from the repurchase of shares will be treated as dividend. Under this new tax system, share buyback will come as additional income of the company and tax will be levied on it (Tax on Share Buyback).
Regarding these new rules, experts say that this may increase the burden of investors and share buyback may also decrease.
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Will investors benefit or lose?
The new rules for share buyback can bring both benefits and losses for investors. Siddharth Maurya, Founder and Managing Director, 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 buybacks and what impact it will have on their investments.
Siddharth Maurya also pointed out that due to these rules, companies may take more time in the process of buyback. This may reduce the possibility of quick gains on stock prices, which may be disadvantageous for investors who want to make quick profits. Apart from this, companies may also have to bear additional costs of compliance, 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 trouble.
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