Mumbai: The government has imposed higher tax on buy back of share to stop companies from misusing the route to circumvent payment of dividend distribution tax. The Finance Bill 2019 has introduced tax of 20 per cent on distributed income for buyback of equity shares listed on a recognised stock exchange. It is proposed in the Union Budget that effective from 5th July 2019, buyback of equity shares will attract tax at the rate of 20 per cent (plus surcharge), similar to dividend distribution tax. Over the past few years, hundreds of companies have rewarded investors through this route especially several large IT sector companies like Infosys, Wipro and TCS. Indian IT stepped up payout of free cash flow through a mix of dividend and buyback (more tax efficient) in the past three years.