The deadline for filing income tax returns (ITR) for the assessment year (AY) 2025–26 ends today, with the Income Tax Department confirming on its official ‘X’ handle that no extension will be granted. Taxpayers must complete the process by the end of the day to avoid penalties.
While filing returns, individuals are required to disclose all sources of income, including earnings from investments in the stock market. This not only covers capital gains and losses but also extends to dividend payouts, bonus share allocations, and buyback proceeds. Experts caution that many investors often overlook these additional income components, which are fully taxable under existing rules.
Tax treatment of dividend income
According to Pankaj Mathpal, MD & CEO of Optima Money Managers, dividends — whether interim or final — are considered additional income for investors since they are credited without the sale of shares. “Dividend income is added to the taxpayer’s total annual income and taxed as per the applicable income slab,” he explained.
Buyback of shares: New tax rule
Buybacks too fall under the tax net following a regulatory change. Mathpal noted that up to September 30, 2024, companies themselves were liable to pay tax on share buybacks. However, from October 1, 2024, the rules changed. Proceeds from buybacks by domestic listed companies are now treated as deemed dividends under Section 2(22)(f) of the Income Tax Act. “This income is added to the investor’s annual earnings and taxed according to their slab rate,” he added.
Bonus shares and their taxation
Balwant Jain, Mumbai-based tax and investment expert, pointed out that the cost of acquisition for bonus shares allotted during FY 2024–25 is considered zero. “If these shares are sold within a year, the gains are treated as short-term and taxed at 20%. For sales made after one year, long-term capital gains tax at 12.5% applies on profits above ₹1.25 lakh,” he said.
He further clarified that if the bonus shares were issued before January 31, 2018, their acquisition cost would be the stock’s closing price on that date. For bonus shares issued after January 31, 2018, the cost remains zero.
Key takeaway for taxpayers
With the deadline closing today, financial planners urge investors not to miss reporting such incomes while filing their ITRs. Non-disclosure may attract scrutiny or penalties later.
