What is Buyback

Companies issue shares to the public and receive money from them for doing their business.

However, sometimes when company has surplus funds, it purchases its own share from the market.  This is called buyback of shares


Buy Back of Shares / Securities by Company   - Special Cases



  • It will be taxable in the hands of shareholders in the year shares public securities are purchased by the companies
  • Amount received from the company will be the Full Value of Consideration
  • This section is applicable only for shares and some specified securities like ESOP (Employee Stock Option plan)



In case of Buyback of Unlisted Shares

BY Domestic Company,

Domestic Company has to pay tax at 20% + 12% surcharge+3% cess(23.072%)

as per Section 115QA

Effective Rate of Additional Income Tax

Particulars Amt
Additional Income Tax 20
Surcharge @12% 2.4
Tax Including Surcharge 22.4
Cess 3% 0.672
Total Amount 23.072


In this case,Income of Shareholder is exempt under Section 10(34A) as company had already paid the tax


  1. Income Tax
  2. Income from Capital Gains

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 11 years. He also provides Accounts Tax GST Training in Delhi and Pune.