New Delhi, Feb. 1 -- In her Budget speech on Sunday, Union finance minister Nirmala Sitharaman proposed taxing the proceeds of share buybacks as capital gains instead of dividend income.

The move addresses a complex and widely criticised tax rule that has led to punitive outcomes for promoters and shareholders. However, the Budget also proposed a special capital-gains tax rate of 30% for non-corporate promoters to prevent them from using buybacks as the primary way of extracting profits. Corporate promoters will pay a 22% effective tax rate.

"The move to tax buybacks as capital gains across all shareholder categories is a clear attempt to curb tax arbitrage and bring greater fairness to the system, supporting more transparent and discip...