As per the Income-tax Act, 1961, buyback of shares is taxable in the hands of the shareholder. The shareholder is liable to pay tax on the difference between the buyback price and the original purchase price of the shares.
Taxation under Section 115QA: For buybacks done bylisted companies, the company is required to pay a buyback tax under Section 115QA of the Income - Tax Act. The shareholder received the buyback amount tax-free.
Capital gains: If the buyback is not taxed under Section 115QA, the gains may be treated as capital gains and taxed accordingly, either as short-term or long-term capital gains depending on the holding period.
CAclubindia
