“For reasons of equity, I propose to tax income received on buy back of shares in the hands of the recipient,” Sitharaman said.
Reacting on the development, Aashish Somaiyaa, CEO of WhiteOak Capital Asset Management said that the decision on the buyback can be interpreted as a “double tax”. What was unexpected was rationalising of capital gains structure, Somaiyaa said, lamenting on a slew of measures now that would increase tax outgo for investors, that too for the long-term investors across the asset classes. He further called it a negative surprise.
Echoing a similar sentiment, Manish Jain, Director of Institutional Business at m.Stock by Mirae Asset said that the income from buyback of shares being taxed in the hand of recipients was aligned like dividend distribution tax which is happening towards double taxation.
“It should have been the other way round that taxes on dividends should have been removed,” he added. STT is increased for F&O but this increase is not really meaningfully helpful to curb any speculation on the retail segment. I think it’s over to SEBI now.Another expert Mehul Bheda, Partner at Dhruva Advisors said that the new tax treatment of buybacks as dividends is likely to diminish their attractiveness.Among other major announcements for the capital markets, the FM increased the Security Transactions Tax (STT) on futures and options to 0.02% and 0.1%, respectively. It was with a view to deepen the tax base, the FM said in her 85-minute speech.On the long-term capital gains (LTCG) tax front, the rate has been increased to 12.5% from an earlier 10% while the exemption is increased from Rs 1 lakh to Rs 1.25 lakh. This tax rate of 12.5% is applicable on transactions from Tuesday.
Jain of m.Stock by Mirae Asset said this is retrospective in a sense and could have been avoided.
Nirmala Sitharaman presented her 7th Union Budget on Tuesday becoming the only Indian Finance Minister to have presented most consecutive budgets. While Morarji Desai holds the distinction of presenting the most number of budgets at 10, he has presented consecutive five full budgets and one interim budget between 1959 and 1964.
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