Capital gains on buyback, etc. of shares [Section 46A] :

Any consideration received by a shareholder or a holder of other specified securities from any company on purchase of its own shares or other specified securities held by such shareholder or holder of other specified securities shall be chargeable to tax on the difference between the cost of acquisition and the value of consideration received by the holder of securities or by the shareholder, as the case may be, as capital gains. The computation of capital gains shall be made in accordance with the provisions of section 48.

Such capital gains shall be chargeable in the year in which such shares/securities were purchased by the company. For this purpose, “specified securities” shall have the same meaning as given in Explanation to section 77A of the Companies Act, 1956.

However, in case of buyback of unlisted shares by domestic companies, additional incometax@ 20% (plus surcharge@12% and cess@3%) is leviable in the hands of the company. Consequently, the income arising to the shareholders in respect of such buyback of unlisted shares by the domestic company would be exempt under section 10(34A), where the company is liable to pay additional income-tax on the buyback of shares.

(1)	(2)	(3)
Taxability in the hands of the –	Buyback of unlisted shares by domestic companies	Buyback of shares other than shares referred to in column (2)
Company	Subject to additional incometax@ 23.072%.	Not subject to tax in the hands of the company.
Shareholders	Income arising to shareholders exempt under section 10(34A	Income arising to shareholders taxable as capital gains under section 46A.