TAXATION: DIVIDEND-PAYING STOCKS, BONUS SHARES, AND BUYBACK OF SHARES

An intermediate or final dividend is an extra income earned by a stock market investor that does not need the sale of portfolio shares

- AMIT GUPTA, MD, SAG INFOTECH

To reward their long-term investors, several corporations T have recently announced stock dividends, share buybacks, and the issue of bonus shares. However one should be aware that because these benefits are seen as income by the shareholders, they are subject to income tax.

Let's examine the taxation of dividend-paying stocks, share buybacks, and bonus shares.

Tax on equities that produce dividends or interim dividends

According to tax and financial experts, an intermediate or final dividend is an extra income earned by a stock market investor that does not need the sale of portfolio shares. As a consequence, it is seen as extra income by the investors, and at the time of filing an income tax return (ITR), it is added to one's yearly income. Income tax is then assessed depending on the taxpayer's tax bracket after this addition.

Bonus share tax