Accountancy, asked by vibhatiwari252, 4 months ago

Question No. 24
companies who were evading taxes on distribution of dividend using buy back as a mode of wealth distribution
Buy Back Tax (BBT) was introduced with an intent to
Motivate
Incentivise
Discourage
None of the above​

Answers

Answered by Anonymous
15

Answer:

option 3 is correct

Explanation:

hope.its helpful.

Answered by Sreejanandakumarsl
0

Answer:

The correct answer is : Discourage

Therefore, Buy Back Tax (BBT) was introduced with an intent to discourage companies who were evading taxes on distribution of dividend using buy back as a mode of wealth distribution.

Explanation :

  • Companies can give dividend payments to shareholders or buy their shares back from them.
  • After deducting the net amount received at the time of the original issue of shares, buyback tax is assessed on the net consideration paid by firms for repurchasing shares.
  • Unlisted businesses adopted the buyback strategy rather than a dividend strategy to disperse surplus and reduce taxes.
  • In 2013, a buyback tax was enacted for unlisted corporations, and as of July 2019, it also applied to public companies.
  • Both listed and unlisted businesses are required to pay the same tax, which is 20 percent, plus a surcharge of 12 percent, as well as a 4 percent health and education cess, for a total of 23.30 percent of the "distributed revenue."
  • In 2020, the government eliminated the dividend distribution tax and changed the dividends so that they were taxed in the recipent's hands.
  • Shareholders are now exempt from paying taxes on profits received through buybacks through the tender process, but they are subject to capital gains tax if the buyback occurs on the open market.
  • Experts now advocate eliminating buyback taxes and replacing them with capital gains taxes for shareholders on profits from buybacks made through tenders.
  • The premise behind the provision's establishment was that unlisted corporations used share buybacks as a means of avoiding dividend distribution tax.
  • Due to the buyback's treatment as capital gains in the hands of the shareholder and the company's payment of dividend distribution tax.

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