The Indian government on Monday invited stakeholders' comments on draft rules for determining the quantum of distributed income arising out of buy back of shares of unlisted companies for levy of tax.
Under the Income Tax Act, 1961, additional income tax at the rate of 20 per cent is levied on the distributed income arising out of buy back of unlisted shares by the company.
"The Finance Act, 2016 amended the definition of distributed income, with effect from June 1, to mean the consideration paid by the company on buy back of shares as reduced by the amount, which was received by the company for issue of such shares, determined in the manner as may be prescribed," a Finance Ministry release here said.
The proposed amendment seeks to remove the existing limitations created by the restrictive definition of buy back.
The draft rules state that "where the share has been issued by a company on its subscription by any person, the paid up amount actually received by the company in respect of such share including any amount actually received by way of premium shall be the amount received by the company for issue of the share".
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The Central Board of Direct Taxes has invited comments and suggestion on the draft rules by July 31, the statement added.
--IANS
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