Taxability On Buyback Of Shares Of Companies: Buyback of shares means the re-acquisition of its own shares by a company. It also means returning the money of shareholders while obtaining back its shares. In such a case, the shareholders receive the market value of shares, and the company re-absorbs its ownership portion from the public.<\/p>\n
The taxes to be charged while buying back shares is also divided based on the listing of the company, which are as follows:<\/p>\n
Table Of Contents<\/p>\n
Taxability in the hands of companies:<\/strong>\u00a0Listed companies are not taxable for the buyback of their own shares.<\/p>\n Taxability in the hands of shareholders:<\/strong>\u00a0The taxes to be charged at the end of shareholders depend on the buyback of shares. Buyback of shares is classified into two categories which are as follows:-<\/p>\n For Buyback of shares directly from shareholders:<\/strong> The profit in the hands of shareholder while buyback of shares is liable to taxation as follows:<\/p>\n For Long-term capital gain (for holding periods of more than 12 months): Any profits from long-term capital shall be taxable as per Section 112 of the Income Tax Act at any of the following lower rates:<\/p>\n As per Section 112, there won\u2019t be any benefit of exemption for capital gains up to \u20b9100,000, and the flat tax rate of 10% shall be charged for capital gains exceeding \u20b9100,000. Such transactions do not come under Securities Transaction Tax (STT).<\/p>\n For Short-term Capital gain (for holding periods less than 12 months): As per Section 48 of the Income Tax Act, profits from short-term capital are taxable at the applicable rate for the shareholder.<\/p>\n An individual falling under the 5% tax slab shall be charged at the rate of 5%. Individuals will be assigned a tax rate at the already applicable rate. Benefits for a flat tax rate of 15% is not available under Section 111A as such transactions are not chargeable to Securities Transaction Tax (STT).<\/p>\n For Buyback of shares via Recognized Stock Exchange:<\/strong> The profit of shareholders shall be liable to taxation in the following ways:<\/p>\n For Long-term capital gain (for holding periods of more than 12 months): Any capital gains that are exceeding \u20b9100,000 shall be charged under Section 112A at a flat tax rate of 10% as such transactions are chargeable to Securities Transaction Tax (STT).<\/p>\n But such benefits are available only when the acquisition of shares was charged to STT; otherwise, such acquisition shall be taxed in the form of buyback directly from the shareholder.<\/p>\n For Short-term capital gain (for holding periods less than 12 months): Any gains from short-term capital is taxable under Section 111A at a flat rate of 15%. Such transactions are also chargeable to Securities Transaction Tax (STT).<\/p>\n Taxability in the hands of companies:<\/strong>\u00a0As per Section 115QA of the Income Tax Act, buyback of shares by any unlisted companies is liable for taxation at a flat rate of 20% on the \u2018distributed income\u2019. Distributed income means any such consideration paid by the unlisted company on the buyback of shares as reduced by the amount which was received by the unlisted company while issuing such shares.<\/p>\n Other Points to consider<\/p>\n As per Section 10(34A) of the Income Tax Act, any receipts in the shareholder’s hands are exempted for taxes.<\/p>\n","protected":false},"excerpt":{"rendered":" Taxability On Buyback Of Shares Of Companies: Buyback of shares means the re-acquisition of its own shares by a company. It also means returning the money of shareholders while obtaining back its shares. In such a case, the shareholders receive the market value of shares, and the company re-absorbs its ownership portion from the public. …<\/p>\n\n
<\/a>For Buyback Of Shares By Unlisted Companies<\/strong><\/h3>\n
\n
Taxability in Hands of Shareholders<\/h3>\n