What are the new Tax Rules on Buyback of Shares?

Effective from 1^st October 2024, new tax rules on shares buyback will be applicable as follows:

Gains received on shares buyback will be considered as “Dividend” income rather than “capital gain”. Earlier, buyback proceeds was tax-free for investors, but under the new rules, dividend income on buyback will be taxed as per the applicable tax slab.

Capital Loss treatment for Company

• The cost of shares buyback by the company will be treated as capital loss, and can be set off against other capital gains.
• A company can carry forward this capital loss to offset against future capital gains for 8 subsequent years.