Share buybacks losing lustre as 20% tax bites; firms await relief in Budget

Experts blame the change in tax dynamics for the sharp drop in buybacks

The 20 per cent tax on share buybacks, introduced in the last Budget, has altered the way companies reward their shareholders. Buybacks, which had emerged as a popular tool to pay back investors following an increase in dividend tax, have once again lost their appeal. So far this financial year, companies have repurchased shares worth Rs 16,647 crore, less than half compared to the same period of the last financial year. 

The bulk of the buybacks done in FY20 were announced before the Union Budget in July 2019, when Finance Minister Nirmala Sitharaman had introduced the buyback tax with the