• Buy back shares by a company by way of capital reduction - treatment in the hands of shareholder

In case the Co has credited an amount in our bank towards the Capital reduction of equity shares held by us (by way of buy-back), then what is the treatment of tax in our hands as an individual shareholder? Is there any LTCG Capital gains Tax in our hands assuming that these were old shares purchased by us prior to 31.01.2018? Kindly note that since this is a direct Buy back by the Co therefore there is no STT paid by the Co. So basically seeking clarification as to whether there will be any LTCG tax in this case. If No - then will it be shown as Exempt income under our IT return? If Yes, then where must it be shown in the ITR; under CG schedule or under 112AD schedule of the ITR ?
Asked 24 days ago in Capital Gains Tax

If it is a buyback by company then no tax implication in hands of shareholder has company has to pay tax on same. But I need more information on same to answer in a better manner.

 

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Naman Maloo
CA, Jaipur
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A residential house becomes long term after 2 years of ownership.

Yes you can set off loss on sale of house against capital gain.

Naman Maloo
CA, Jaipur
3893 Answers
52 Consultations

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- If the shares are unlisted on any recognised stock exchange in India then company is liable to pay tax @20% (plus SC plus + Cess) on the distributed income on account of buy back of shares (relevant section is 115QA of Income Tax Act). If the shares are listed then shareholder is liable to pay tax ( relevant section is 46A of Income tax Act).

 

- In case of HP, if it is held for more than 2 years then it is a LTCA. Yes you can claim LTCL in ITR and set off against LTCG only. In case of ROR, global income is taxable.

 

 

Vivek Kumar Arora
CA, Delhi
4243 Answers
408 Consultations

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