Under section 115-Q of the Income Tax Act, 1961, a buyback tax at the rate of 20% is levied on distributed income arising out of a buyback of unlisted shares of a company. The Finance Act, 2016, amended the definition of “distributed income” (with effect from 1 June) to mean the consideration paid by a company on a buyback of shares as reduced by the amount which was received by the company for the issue of such shares, determined in the manner prescribed.
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On 25 July, the Central Board of Direct Taxes (CBDT) released draft rules for determining the amount received by a company for its shares under different circumstances. The CBDT called for comments and submissions from stakeholders and the public by 31 July.
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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bangalore, Singapore, Silicon Valley and Munich. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.
