LONG TERM/SHORT TERM CAPITAL GAIN ON BUY BACK OF SHARES.

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CA Nimesh Khandelwal (Querist)
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01 June 2011 Dear Sir,

I want to know that whether the buy back of shares by company is chargeable as long term or short term capital gain.

Please reply fast.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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01 June 2011 The underlying asset of the shareholder is transferred to the company in the process of buy back of shares by the company and as such it becomes a matter of capital gains/loss for the share holder depending upon his period of share holding.

In case the holding period is more than 12 months LTCG will arise to the shareholder.
(Section 46A)
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For company there will be no tax implications as it is deemed to be a repayment of capital to the respective shareholders.

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