What is buyback tax?

Buyback tax is a type of tax imposed on companies that repurchase their own shares from shareholders. Governments typically levy this tax to discourage companies from distributing profits to shareholders through share buybacks instead of paying dividends.

This tax was first introduced for unlisted companies in 2013, as these companies often opted for buybacks over dividends to distribute surplus funds and avoid taxes.

In July 2019, the government extended the buyback tax to listed companies.


In 2020, the government abolished the dividend distribution tax, transferring the tax burden to the recipients of dividends.

The current rate is 20 per cent, plus a 12 per cent surcharge and a 4 per cent health and education cess, amounting to a total of 23.29 per cent of the 'distributed income.'