Income tax return (ITR) filing: The due date for ITR filing for the AY 2025-26 is ending today, as the Income Tax Department has officially announced on its social media account ‘X’ that there will be no ITR due date extension. Hence, one has to apply one’s ITR by today EOD. During ITR filing, an individual needs to report all kinds of income. So, an earning individual has investments in the stock market. In that case, one will have to report their gain-loss during the financial year 2024-25 along with other benefits, which include income from dividends, bonus shares, and buyback of shares.
According to tax and investment experts, a stock market investor’s income from dividends, bonus shares, and share buybacks is subject to income tax, and hence, one must report this income while filing their ITRs.
Income tax rule on dividends
On how income tax rule applies to one’s income from dividends, Pankaj Mathpal, MD & CEO at Optima Money Managers, said, “A stock investor’s income from interim dividend or final dividend is an additional income and it comes to one’s account without selling of the portfolio stock. So, it is considered an additional income for the investors. It gets added to one’s annual income at the time of income tax return (ITR) filing, and income tax is levied as per the income tax slab in which the taxpayer falls after adding these dividends to one’s annual income.”
ITR rule for buyback of shares
Pankaj Mathpal of Optima Money Managers said that investors did not pay for buybacks of shares before October 1, 2024, as the company itself paid for them. However, from 1 October 2025, buybacks of shares are considered income for investors, and hence, investors have to pay income tax if an earning individual availed of the benefit of share buyback after 1 October 2024 while filing one’s ITR for AY 2025-26.
On how buyback of shares is taxed under the new income tax rule, Pankaj Mathpal said, “From October 1, 2024, proceeds received from the buyback of shares by domestic listed companies are to be treated as deemed dividends U/s 2(22)(f). This means one’s income from the buyback of shares would be treated as an additional income, as it would get added to one’s annual income, and income tax would be levied as per the income tax slab applicable to one’s income.”
Income tax on bonus shares
On how bonus shares are taxed, Mumbai-based tax and investment expert Balwant Jain said, “A potential beneficiary of bonus shares during FY 20274-25, the cost of bonus shares would be zero. If the bonus shares are sold within one year of issuance, then a flat 20% STCG will be levied on the bonus shares. If bonus shares are sold after holding them for more than one year, then in that case, the bonus share beneficiary will have to pay 12.50% tax on income over ₹1.25 lakh that the shareholder has earned from the date of issuance of bonus shares.”
On income tax calculation while selling bonus shares, Mumbai-based tax and investment expert Balwant Jain said, “If the bonus shares have been issued before 31st January 2018, then in that case, the cost of the bonus share would be the close price of the stock on 31st January 2018. If the bonus shares have been issued after 31st January 2018, then the cost of the bonus shares would be zero.”
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