Buybacks down to a trickle after tax tweak shifts burden to shareholders

Share buybacks have nearly disappeared post October 2024 as new tax rules impose higher liability on shareholders, making dividends a simpler and more efficient route

Share buybacks have all but disappeared following a rule change on October 1 last year that shifted the tax burden from companies to shareholders. Under the revised norms, buyback proceeds are taxed as dividends at the shareholders’ applicable income-tax rates, significantly increasing the liability for high-networth individuals and institutional investors in the highest tax bracket.

 

Since the change, only two buybacks have been completed: A ₹360 crore repurchase by ferro alloys manufacturer Nava and a ₹72 crore offer by online matrimonial services provider Matrimony.com.

 

“Buybacks have dried up since the tax-rule change, which aligned their taxation with dividends. Despite a