Price, Dates & Deemed Dividend Tax Explained

Tax Treatment (Deemed Dividend)

• Entire proceeds taxed as dividend: The full amount you receive in the buyback (₹1,800 per accepted share) is taxed as deemed dividend under the head Income from Other Sources, at your applicable slab rate.
• Cost of acquisition becomes capital loss: Your original purchase cost of the accepted shares is treated as a capital loss. You may set it off against existing capital gains or carry it forward as per the Act.
• TDS on payout: The company deducts tax at source on the gross payout (typically 10% for residents; for non-residents generally 20% + surcharge + cess, subject to DTAA relief). The exact TDS shown in your contract note/payout advice should be used while filing the return.
• Slab-rate example (for illustration):
  • If 100 shares are accepted → Proceeds = 100 × ₹1,800 = ₹1,80,000.
  • This ₹1,80,000 is added to your total income and taxed per slab:

    Slab Rate	Tax on ₹1,80,000
    10%	₹18,000
    20%	₹36,000
    30%	₹54,000

• Return filing — what to do:
  • Report buyback proceeds under Income from Other Sources.
  • Claim the TDS shown by the company against your final tax liability.
  • If your slab tax exceeds TDS, pay the balance; if TDS exceeds liability, claim a refund.
  • Report the capital loss (your cost of acquisition) for set-off/carry-forward as permitted.
• Important: Deemed dividend taxation typically results in a higher effective tax than normal capital gains (15% STCG / 20% LTCG with indexation). Compare post-tax outcomes before deciding to tender.

This is a general educational summary; please consult your tax advisor for personalised guidance.