In Short:
Corporate India is rushing to offer share buybacks before new tax changes take effect on October 1. The government’s Budget shifted tax liability from companies to shareholders, increasing the tax rate on buybacks significantly. Major companies like Indus Tower are leading with offers worth thousands of crores. Experts suggest that firms with strong cash flows, especially in IT and pharma, may engage in buybacks, but investor responses will vary based on individual tax rates.
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<h2>Corporate India Rushes to Buyback Shares Amid Tax Changes</h2>
<p>Despite the favorable south-west monsoon, **Corporate India** is making a splash in the market with a string of buyback offers. They're trying to get ahead of some not-so-great tax changes introduced in the recent Budget, which are set to take effect from <strong>October 1</strong>.</p>
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<h3>The Budget Shift</h3>
<p>In her Budget speech, **Finance Minister Nirmala Sitharaman** announced a significant shift in income tax liability on share buybacks, transferring the tax burden from companies to shareholders. This change has companies racing to repurchase shares before the new rules kick in.</p>
<h3>Major Players Join the Buyback Wave</h3>
<p>In the wake of this announcement, the boards of **13 companies** have convened and proposed a hefty buyback of shares worth a staggering <strong>₹4,572 crore</strong>. Leading this charge is **Indus Tower**, with an impressive buyback offer of <strong>₹2,640 crore</strong>, followed closely by **AIA Engineering** and **Savita Oil Tech**, who plan to buy back shares worth <strong>₹500 crore</strong> and <strong>₹364 crore</strong> respectively.</p>
<p>Additionally, **Cera Sanitaryware** is making headlines by offering to repurchase shares at a striking premium of <strong>19%</strong>, valuing them at <strong>₹12,000</strong> each compared to Friday’s close of <strong>₹10,108</strong>.</p>
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<h5 class="sub_head">A Windfall for the Government</h5>
<p>Under the current rules, companies that buy back shares are slapped with a <strong>20% tax</strong>; however, this is tax-free for shareholders. Starting in October, though, any amount received by shareholders from buybacks will be treated as dividend income and taxed according to their income tax slabs. The companies will have to take on the responsibility for withholding the tax.</p>
<p>This new tax regime is poised to be a windfall for the **Government**, with tax collections potentially spiking up to <strong>39%</strong>. Experts are raising eyebrows, suggesting that this new buyback tax is disproportionately higher compared to the long-term capital gains tax of <strong>12.5%</strong> and short-term capital gains tax of <strong>20%</strong> applicable to regular share sales.</p>
<h3>Expert Opinions on the Impacts</h3>
<p>**Manish Chowdhury**, Head of Research at **StoxBox**, believes that companies that are cash-rich and have low leverage are likely to join the buyback frenzy. He pointed out that IT sector companies, with their robust balance sheets and relatively stable stock movements, are in a prime spot to benefit from the changing tax landscape.</p>
<p>Similarly, **Satish Menon**, Executive Director at **Geojit Financial Services**, noted that the new tax rules might discourage non-retail investors from participating in buybacks, as their involvement will hinge on individual tax circumstances. Still, ongoing buyback offers might attract positive responses due to market optimism and premium pricing.</p>
<p>According to **Narinder Wadhwa**, Managing Director & CEO of **SKI Capital Services**, we might be looking at a surge in buyback activities across sectors like IT, pharma, FMCG, financials, and energy utilities—especially those with solid cash reserves and consistent earnings. He emphasized the importance of evaluating each buyback on its own merits, taking into account the company’s financial stability and the long-term benefits of the buyback.</p>
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