ITR submitting: Results season for Q3FY23 is about to finish and listed entities are showering interim and remaining dividends, bonus shares, buyback of shares, and so forth. to reward its loyal long run traders. As all these rewards introduced by the listed corporations are revenue of its shareholders, it turns into necessary to understand how revenue tax guidelines applies on dividend paying shares, issuance of bonus shares and buyback of shares.
As per tax and funding specialists, interim dividend or remaining dividend is a further revenue of a inventory market investor and it comes to at least one’s account with out promoting of the portfolio inventory. So, it’s thought-about a further revenue of the traders and therefore it will get added to at least one’s annual revenue on the time of revenue tax return (ITR) submitting and revenue tax is levied as per the revenue tax slab through which the taxpayer falls after including these dividends with one’s annual revenue. However, within the case of buyback of shares, the revenue tax is being paid by the corporate saying the buyback whereas shareholder want to not pay any revenue tax.
Income tax calculator: How bonus shares are taxed
On how revenue tax rule applies on sale of bonus shares, Sujit Bangar, Founder at Taxbuddy.com mentioned, “Bonus shares are issued by company to the existing shareholders in proportion of their existing shares. There is no tax implication at the time of allotment of bonus shares. It is one of the benefits of issuing bonus shares. Period of holding for bonus share is calculated from date of allotment of bonus shares to sell date. Tax is applicable on bonus shares at time of selling as it is applicable to other shares.”
On revenue tax calculation whereas promoting bonus shares, Mumbai-based tax and funding professional Balwant Jain mentioned, “If the bonus shares have been issued before 31st January 2018, then in that case, cost of the bonus share would be close price of the stock on 31st January 2018. If the bonus shares have been issued after 31st January 2018, then cost of bonus shares would be zero.”
Balwant Jain mentioned revenue tax on bonus share sale is calculated on FIFO (First In First Out) foundation citing, “If the bonus shares are sold within one year of issuance, then flat 15 per cent income tax will be levied as income tax on bonus shares. If bonus shares are sold after holding it for more than one year, then in that case, bonus share beneficiary will have to pay 10 per cent tax on income over ₹1 lakh that shareholder has earned from issuance of bonus shares.”
How interim/remaining dividends are taxed
On revenue tax guidelines relevant on interim or remaining dividend acquired by a shareholder, SEBI registered tax and funding professional Jitendra Solanki mentioned, “Interim or final dividend is credited to shareholders’ account without selling of the portfolio stock. Hence, at the time of ITR filing, dividend income gets added to one’s annual income and tax is levied as per the income tax slab applicable on the taxpayer.”
Income tax rule relevant on buyback of shares
“As per Section 115QA of the IT Act, any domestic company which buyback its own shares is liable to pay additional income-tax on distributed income at an effective tax rate of 23.296 (including 12% Surcharge and 4% Health and education cess). Buyback tax shall be paid with in 14 days from the date of payment of consideration. If fail to pay within stipulated time, 1% simple interest will be imposed,” mentioned Sujit Bangar of Taxbuddy.com including, “As per section 10(34A) of IT act Capital gain arising out of buyback of will be exempted from tax in the hands of shareholder.”
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