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capital gain
If the preference shares are redeemed by the private limited company, is it taxable in the hands of the shareholder?
Replies (1)
Dear Sapna,
There are two aspects of Redemption of Preference share:
1. When the Redemption of Listed Shares are done.
2. When Redemption of Unlisted share are done .
In the first case, When Redemption is done of Listed preference shares then it will be taxable in hands of Shareholders u/s 46A. In that case it will be taken simply just a transfer of capital asset by Shareholder and the gain arises will be added to his income.
Second case which is about Redemption of Unlisted Preference Share ( which I think as your case) THERE WOULD NOT BE ANY TAX LIABILITY IN THE HANDS OF SHAREHOLDER. It will be taxable in hands of Company itself u/s 115QA @ 20+12% SC + 3% Cess i.e. Effectively 23.072%. But Exempt in hands of shareholders.
There are two aspects of Redemption of Preference share:
1. When the Redemption of Listed Shares are done.
2. When Redemption of Unlisted share are done .
In the first case, When Redemption is done of Listed preference shares then it will be taxable in hands of Shareholders u/s 46A. In that case it will be taken simply just a transfer of capital asset by Shareholder and the gain arises will be added to his income.
Second case which is about Redemption of Unlisted Preference Share ( which I think as your case) THERE WOULD NOT BE ANY TAX LIABILITY IN THE HANDS OF SHAREHOLDER. It will be taxable in hands of Company itself u/s 115QA @ 20+12% SC + 3% Cess i.e. Effectively 23.072%. But Exempt in hands of shareholders.
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