Share Buyback New Rule: New rules for share buyback are coming into effect from October 1, what will be the impact on investors?

In the Budget 2024 speech, Finance Minister Nirmala Sitharaman said that a new tax system is going to be implemented on share buyback. The new rules (Share Buyback Rules) will come into effect from October 1, 2024. Under the new rules, if an investor benefits from a share buyback, it will be considered a dividend.

Now tax will be levied based on dividends. 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 dividends. Under this new tax system, share buyback will be an additional income of the company and tax will be levied on it (Tax on Share Buyback).

Experts say that these new rules may increase the burden on investors and may also reduce share buyback.

Investors will benefit or lose
The new rules for share buyback can bring both benefits and losses for investors. Siddharth Maurya, Founder and Managing Director, of Vibhavangal Anukulkara Private Limited, said that under the new rules, companies will have to follow more transparency and rules in the process of buyback. This will benefit investors as they will get more clarity on how companies are doing buybacks and what impact it will have on their investment.

Siddharth Maurya also said that due to these rules, companies may take more time in the process of buyback. This may reduce the possibility of quick gains on share prices, which can be harmful 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 problems.