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buy back of shares

narayan maheswari (student) (140 Points)

11 May 2017

How to calculate tax liability of shareholder when listed co. buy back its shares

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4 Replies

prudhvi raj (8 Points)
Replied 11 May 2017

This is the case of listed company shares. So, the difference between consideration received and cost of acquisition is taxable as capital gain. In case shares are held for long term, indexation facility is available.
But,if it will be in case of unlisted shares, the company has to pay additional income tax @ 20percent(plus surcharge and education cess). It will be exempt in the hands of shareholders.

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rama krishnan (12239 Points)
Replied 11 May 2017

prudhvi sir will you explain with the help of an example please

narayan maheswari (student) (140 Points)
Replied 12 May 2017

If shares are held for long term , then capital gain will be exempted or not under section 10(38).

prudhvi raj (8 Points)
Replied 12 May 2017

We can't claim exemption of sec 10(38),because buyback is different from transfer of shares. In transfer, shares will exist but in buyback they will cease to exist. So, taxability arises.