TAX TREATMENT TO UNLISTED SHARE CAPITAL REDUCTION VIDE DIVIDEND PAYOUT

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SYNGENTA INDIA ANNOUNCED BUY BACK (CAPITAL REDUCTION) VIA DIVIDEND COUPLE OF YEAR AGO WHEN DDT WAS APPLICABLE AND DIVIDEND WAS NOT TAXABLE AT THE HANDS OF SHAREHOLDERS.HOWEVER DUE TO DELAY IN NCLT ETC THEY COULD BRING THIS LAST YEAR FY 20-21 WHEN GOVT HAS ALREADY CHANGED RULES FOR DIVIDEND AND IT BECAME PAYABLE AT THE HANDS OF INVESTORS AT APPLICABLE TAX RATES.

SUPPOSE X IS THE COST OF SHARES PURCAHSED FEW YEARS AGO AND BEING UNLISTED WHAT IS THE TAX APPLICABILTY AND WHAT HAAPENS TO THE COST PRICE OF THE SHARES SINCE TOTAL BUYBACK IS RECD AS DIVIDEND.

FUN PART IS COMPANY SAVED DDT AND DID NOT PASS IT TO INVESTORS AS BUY BACK VALUE WAS FINALISED CONSIDERING DDT ETC.

 

Replies (2)

Cost price of the share depend upon the management decision as to how they are buying back ie at premium or par or discount. Next, the tax payers are dividend holders and not companies anymore and this company is actually not saving any taxes in the form of aseet.

in my opinion , the company will be liable to pay tax u/s 115QA and the investors will be exempt u/s 10(34A). the company was not a listed company, when it declared to buy back the shares.

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