Who will have to pay 20% tax on the Infosys buyback amount?

A 20% TDS on the Infosys buyback amount applies only in specific situations, primarily involving PAN-related non-compliance or rules applicable to non-resident shareholders.

1. Non-resident shareholders (NRIs, FPIs, FIIs, foreign companies, other foreign investors)

Non-residents are subject to withholding tax under Section 195 or Section 196D.

“The withholding tax shall be at the rate of 20% (plus applicable surcharge and cess) or as notified by the GOI on the amount of buyback consideration payable as dividend,” according to the FAQ on Tax Deduction on Buyback released by Infosys.

2. Resident shareholders who do not furnish a valid PAN

Residents who do not provide a PAN or provide an incorrect, invalid, or inoperative PAN will face a 20% TDS rate instead of 10%.

The FAQ states: “As per section 206AA, if the shareholder does not furnish Permanent Account Number… the deductor shall deduct tax at the higher of the following… At the rate of 20%.”

3. Resident shareholders whose PAN is not linked with Aadhaar

As per Section 139AA, a PAN that is not linked with Aadhaar becomes inoperative, triggering a higher TDS of 20%.

4. Shareholders submitting Form 15G/15H without a valid PAN

As clarified in the FAQ: “As per section 206AA, a declaration in Form No. 15G or Form No. 15H is not a valid declaration if it does not contain a valid PAN… Tax will be deducted at the rate of 20% in such cases.”