Below is the Views On today’s announcement - Finance Minister by Mr. Jairaj Purandare, Chairman, JMP Advisors
Relief to listed companies that have announced Buy-back before 5 July 2019
The Indian Finance Minister (‘FM’), in a Press Conference today, announced a string of measures intended to boost the economy.
Exemption from buy-back tax on listed companies that have announced buy-back of shares before 5 July 2019.
The Finance (No.2) Act, 2019 extended the levy of buy-back tax (‘BBT’) to listed companies at 20% with effect from 5 July 2019. This move was intended to put a curb on listed companies resorting to buyback of shares as a tax efficient method for capital reorganisation and for distributions to its shareholders. The amendment shifted taxation from the shareholders to the listed company which proposed to undertake buyback of shares.
Listed companies that had announced buyback or had filed a red-herring prospectus with SEBI before 5 July 2019 were also liable to BBT. Now, it is announced that companies that had already made a public announcement prior to 5 July 2019 will not be subject to BBT.
As a result of this announcement, the FM has provided relief to certain listed companies. It is estimated that buyback issues worth approx. INR 14,000 crore shall not be charged BBT.
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