Income tax rule on bonus shares
Results season is about to end on Dalal Street and companies have been showering interim dividends, bonus shares and buyback of shares. As all these forms of benefits are shareholders’ income, beneficiaries are advised to know the income tax rules applicable on these benefits passed on by the listed companies.
According to income tax experts, a dividend is an additional income being passed on by the company as loyalty benefit. Income tax rules suggest that dividends received by a shareholder is added to its net annual income of the concerned financial year and income tax becomes applicable on the basis of income tax slab in which the taxpayer falls. In the case of buyback of shares, no tax is levied on the beneficiary shareholders as the tax is being paid by the company offering buyback of shares.