Tax benefits of buyback of shares
This query is : Resolved
Sidhant Jain
(Querist)
22 February 2017
What are the tax benefits of buyback of equity shares to both companies and shareholders?
CA S K MISHRA
(Expert)
06 March 2017
For Company it is Capitalization of Reserve. Free float of share in market reduce. When the company believes that market price of its share is under valued as compared to book value and they have sufficient cash reserve, normally they resort to buy back of share. By doing so, promoters share holding will increase and non promoter stake in company will reduce, which will prevent the Company from hostile bid.
From investor point of view, when a company announces buy back which is normally higher than the current market price, the market price of share goes up, so the investor get the opportunity to sell at higher rate. Buy back are normally carried out in open market. It improve share holder value & boost in share prices.
From investor point of view, when a company announces buy back which is normally higher than the current market price, the market price of share goes up, so the investor get the opportunity to sell at higher rate. Buy back are normally carried out in open market. It improve share holder value & boost in share prices.
Sidhant Jain
(Querist)
10 March 2017
Thank you sir but how is it a capitalisation of reserves. And are there any tax implications for buyback.
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