Skip to main content

Buy backs by Unlisted Shares to be taxed : Budget 2013


Union finance minister P Chidambaram in his budget 2013 has decided to levy a withholding tax of 20 % on profits distributed by unlisted companies to shareholders through buyback of shares. The move will deter unlisted companies opting for buyback of shares.

Tax consultants Doshi, Chatterjee, Bagri & Co managing partner A K Doshi claims the move is an attempt to plug a loophole in the Income Tax Act.
"Income Tax Act presently taxes dividend payout by both listed as well as unlisted firms at 16.5 %. However, distribution of dividend through buy-back of shares by both listed as well as unlisted companies attracts lower rate of tax or is not taxed at all. It is for this reason alone that the finance bill 2013-14 has proposed this amendment," Mr Doshi said.

The move will bring about a parity between distribution of dividend and distribution of money by way of buyback of shares by unlisted companies. Rough calculations by tax consultants suggest that the new levy will amount to 22.66 % (including a surcharge of 10 % and education cess of 3 %) on the difference between the original issue price and the amount received from buyback of shares.

A company, having distributable reserves, usually has two options to dis-tribute the same to its shareholders - through dividend, or buyback of shares at a consideration fixed by it. In the first case, payment by company is subject to Dividend Distribution Tax (DDT) and income in the hands of shareholders is exempt. In the second case, the income is taxed in the hands of shareholder as capital gains.

Unlisted companies have been resorting to buy back of shares instead of payment of dividends in order to avoid payment of DDT. "The new levy will curb tax evasion to an extent," said another consultant.



Sandip Ginodia
We deal in over 60 unlisted companies with 15 years of experience . For latest prices visit :www.abhisheksecurities.com/unlisted.htm / call : 09830271248 .


For more info and regular updates about unlisted shares and the stock market :
Follow our blog : www.abhisheksecurities.blogspot.in .
Like us on facebook : www.facebook.com/abhisheksecurities1 
Labels:

Comments

Post a Comment

Please leave your name and email id along with the comment .
Get the updates from this blog direct to your inbox . Fill in your email id on the home page.

Popular posts from this blog

Reliance's JioMart is averaging half a million orders per day; WhatsApp driving growth

  JioMart , Reliance's online-to-offline commerce  platform that launched in May , has scaled up rapidly, riding on the pandemic-fuelled digital acceleration. The service, which went   live in 200 cities across India, is currently processing an average of  500,000 orders per day. " We can go even higher on peak days",  Jio Platforms CEO   Kiran Thomas  revealed at the Facebook for Fuel India 2020 event. He said, "JioMart is empowering millions of  kiranas  and small merchants through the simple and secure platform of WhatsApp, and linking them to Reliance Retail's pan-India supply chain. We expect to grow manifold in future, and are optimistic about enabling new cohorts of users and making it easier for them to shop for daily essentials."  "Customers are transacting seamlessly on JioMart and the  conversational nature of the service  enabled by WhatsApp has made people adapt to it intuitively," he added. Reliance also stated that it will continue t
Post a Comment
Read more

TCS merger with TCS e serve

The board of Tata Consultancy Services (TCS) in its meeting on 18 October 2012 has approved the composite scheme of arrangement between TCS, TCS e-Serve (e-Serve) and TCS e-Serve International (TEIL). The composite scheme of arrangement provides for merger of e-Serve into TCS and demerger of TEIL's special economic zone (SEZ) undertaking(s) to TCS. The appointed date proposed for this scheme is 01 April 2013. TCS holds 96.26% of the paid up equity share capital of e-Serve. TEIL is a wholly owned subsidiary of e-Serve. As per the terms of the scheme of arrangement, shareholders of e-Serve (other than TCS) will receive 13 equity shares of Re 1 each of TCS for every 4 equity shares of Rs 10 each of e-Serve held by them. The board has approved the scheme of merger of Computational Research Laboratories (CRL) and Retail FullServe (RFL) with TCS. The proposed appointed date for the merger of CRL is 01 October 2012 and for the merger of RFL is 01 April 2012. Computational Res
2 comments
Read more

Stock broker SMC Global files for IPO

F inancial services company SMC Global Securities has filed draft red herring prospectus with SEBI for public issue of 1,58,67,380 equity shares of face value of Rs 2 each. The issue comprises a fresh issue of 79,33,690 equity shares by the company and an offer for sale of 79,33,690 shares by Millennium India Acquisition Company Inc. As of September 30, 2012, "We service our broking clients through a network of 43 branches and 2,521 registered sub-brokers and authorized persons spread in more than 500 cities and towns. We have also established an office in Dubai for brokerage and trading activities in that region," the company said. SMC has reported a loss of Rs 0.42 crore and total revenues of Rs 292.24 crore in the year ended March 31, 2012. "The proceeds of the fresh issue shall be utilised for margin maintenance with stock exchanges; part repayment of term loan; investments into subsidiary, SMC Comtrade; and general corporate purposes," according to p
10 comments
Read more