ITR filling for Buyback

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This discussion clarifies how to report earnings from stock buybacks when filing Income Tax Returns (ITR), specifically for ITR 3. It explains that buyback earnings should be declared under Schedule EI as exempted income, while normal stock sales are reported in Schedule CG. The correct calculation of sale value and acquisition cost for buyback shares is also addressed to ensure accurate tax reporting.

Biswajit Das

Biswajit Das (Querist)
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23 July 2024 I am filling out ITR 3. I have earnings from the stock market (no intraday, no F&O), and some of these are from stock buybacks. Are these earnings (buyback) mandatory to show in the ITR? If yes, how and where should I show them?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 July 2024 Yes,
Taxable part under Schedule CG
Exempted part under Schedule EI.
No need to file ITR 3 if no business income or F&O or Intraday to be reported.

Biswajit Das

Biswajit Das (Querist)
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25 July 2024 Okay, then in Schedule CG, should I exclude buyback earnings where it needs to be mentioned in Schedule EI?

For example, suppose STCG:

- Stock A: Buy value - 100; Sell value - 150 (Normal delivery order)
- Stock B: Buy value - 80; Sell value - 120 (Buyback)

Now in Schedule CG, Section 111A:

What will be the Full value of consideration and the Cost of acquisition without indexation?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 July 2024 Cost of acquisition is purchase value
Full value of consideration is Sell Value.

Biswajit Das

Biswajit Das (Querist)
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25 July 2024 Ok, I understand it, but I am confused about the buyback shares.
As you mentioned before, buyback earnings should be included in the Exempted part under Schedule EI.
So, should I add this amount under Schedule CG or exclude it?
That's why I gave an example last time with two types of sales (Delivery & Buyback).

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 July 2024 Exempted income or the transaction is not included in schedule CG..

Biswajit Das

Biswajit Das (Querist)
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25 July 2024 Ok, then is there any problem if I fill it out like this?

For example, suppose STCG:

Stock A: Buy value - 100; Sell value - 150 (Normal delivery order)
Stock B: Buy value - 80; Sell value - 120 (Buyback)

In Schedule CG, Section 111A:
Full Value of consideration - 150 & Cost of acquisition - 100,

and in Schedule EI, 3) Other exempt income - 40

FYI, I have to file ITR 3 because I have freelance income.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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25 July 2024 Yes, this part is correct...

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