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Share buyback received after October 2024

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From 1 October 2024, the amount received on a buyback is treated as dividend in the shareholder's hands and taxed at slab rates. The cost of the shares bought back is treated as a capital loss. That loss can be set off against other capital gains.

Provisions

Sec 2(22)(f), Income-tax Act 1961; Sec 70 (now Sec 108); Sec 74 (now Sec 111)

Analysis

Suppose you received ₹2,00,000 for shares that cost ₹1,20,000. The ₹2,00,000 is dividend income under Sec 2(22)(f), and ₹1,20,000 is a capital loss, short or long term by holding period. TDS on the buyback, if any, is claimed as credit. Check how the AY 2026-27 utility asks for these entries, since this is a new treatment.

Close

  1. Get the buyback statement showing amount and TDS.
  2. Show the amount as dividend under other sources.
  3. Report the cost as a capital loss with nil sale value.
  4. Set off or carry forward the loss.

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