Dividends triumph over buybacks despite potential for higher tax payouts

Share of buybacks in reward kitty drops to lowest in seven years

Choosing between rewarding shareholders through dividends or share buybacks remains a major dilemma for India Inc. Despite the potential for higher tax payouts, dividends have continued to be the preferred method for returning excess cash to shareholders.

In 2022–23 (FY23), the share of buybacks in India Inc’s overall reward pool (total dividends paid and total amount spent on buybacks) fell to 4.85 per cent, the lowest since 2015-16 (FY16).

Experts suggest that the more tax-efficient option between the two depends on the perspective considered.

Currently, companies paying dividends do not face any tax outgo, as dividends are taxed based on