Stock Buyback

Stock Buyback Plan

We have all head about the recent news on Budget and its recent changes and proposals.

When a trader purchases certain shares the company pays him back in two forms one is known as dividend and the other is called Buyback. Companies generally prefer opting for buyback program as companies do not have to pay taxes on them.

Initially these buyback taxes were limited to unlisted companies but now after the budget proposal even listed company fall under the same category.
Many a times companies do not prefer distribution of dividends so that they can save themselves form paying taxes. The step is taken to discourage the practice of avoiding Dividend Distribution Tax (DDT) through buyback of shares by listed companies.

It is proposed to provide that listed firms shall even be at risk of pay additional tax at twenty percent just in case of buyback of share, as is the case currently for unlisted firms

Dividend Distribution Tax

Dividend Distribution Tax is to be paid by firms who distribute their profits to their shareholders within the variety of dividends.
Lots of firms especially high payout firms such as Wipro had shifted to do buyback than to pay a dividend. Now, with this taxation, they’ll be a shift back to dividends. Higher taxation is negative for listed firms.

After the final budget they will be people who will be happy and some who will yet crib about the beneficial changes that have happened. But according to the current verdict these listed companies have to pay buyback taxes. What happens next is yet a mystery but what we know clearly is that our finance minister knows exactly what the country wants.

Want to learn more about buyback tax then you can click on the link and get more information about stock buyback and stock buyback plans

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