Nifty IT index dips 2% as govt proposes to extend buyback tax to listed cos

Shares of information technology (IT) companies were under pressure with Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies down nearly 5 per cent on the National Stock Exchange (NSE) on Friday in intra-day trade, after Finance Minister Nirmala Sitharaman proposed to extend the buyback tax at 20 percent to listed companies as well.

At 02:33 pm; Nifty IT index was down 2.5 per cent, as compared to a 0.88 per cent decline in the benchmark Nifty 50 index.

Among the individual stocks, TCS slipped nearly 5 per cent to Rs 2,140 on the NSE in intra-day trade today. Wipro dipped 4.6 per cent to Rs 271 followed by Infosys (3 per cent at Rs 714), Tech Mahindra (3 per cent at Rs 682), and HCL Technologies (2 per cent at Rs 1,019) in intra-day deal.

The step is taken to discourage the practice of avoiding dividend distribution tax (DDT) through buyback of shares by listed companies.

In past three financial years, as many as 171 companies have bought back shares worth of Rs 1.33 trillion from their shareholders including promoters, according to primedatabase.com.

“In order to discourage the practice of avoiding dividend distribution tax (DDT) through buy back of shares by listed companies, it is proposed to provide that listed companies shall also be liable to pay additional tax at 20 per cent in case of buy back of share, as is the case currently for unlisted companies,” Finance Minister Nirmala Sitharaman said in her Budget speech on Friday.

During the financial year 2018-19 (FY19), TCS had bought back shares worth of Rs 16,000 crore, while the IT giant purchased shares amounting of Rs 13,000 crore in FY18.

Infosys bought back 113 million shares for total amount of Rs 13,000 crore through tender offer in FY18. The company also launched for the second time share buyback of Rs 8,260 crore on March 20, 2019 via open market purchase.