$1 Billion Savings Seen for Firms on India Buyback Tax Exemption

(Bloomberg) -- A one-time exemption could save about $1 billion in taxes for Indian companies that announced share buybacks this year, according to Umesh Mehta, head of research at Samco Securities Ltd.

Share buybacks announced before the government introduced a 20% levy on such transactions on July 5 will be exempt, Finance Minister Nirmala Sitharaman said at a press conference on Friday. More than 70 companies including software exporters Wipro Ltd. and Infosys Ltd. had announced or completed buybacks totaling 355 billion rupees ($5.2) billion before that date, data compiled by Bloomberg show.

READ MORE: India Joins RBI’s Efforts to Boost Growth With $20 Billion Plan

Companies had opted for share buybacks because they thought it was an efficient way to return money to shareholders, according to Ajay Bodke, chief executive officer for fund management services at Prabhudas Lilladher Pvt. “They were blindsided when the tax was brought in, so this exemption can act as a one-time boost,” he said.

©2019 Bloomberg L.P.