For a buy-back completed before 1 October 2024 my client claimed the whole receipt as exempt under section 10(34A). The officer says the company got its section 115QA computation wrong, so the exemption goes. Is that right — and does the exemption still exist for a buy-back done now?
Section 10(34A) is a provision about buy-backs BEFORE 1 October 2024: it exempts in the shareholder's hands "any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA", and because the second proviso to s.115QA(1) switches that section off for any buy-back taking place on or after 1 October 2024, a buy-back from that date is no longer one "referred to in section 115QA" and the exemption has nothing to attach to — the proceeds are instead a deemed dividend under s.2(22)(f). The clause was inserted by the Finance Act, 2013 with effect from 1 April 2014, that is from AY 2014-15, and as originally enacted it was confined to buy-back of shares "(not being listed on a recognised stock exchange)"; the words of limitation had gone by the time the Tribunal reproduced the clause in 2024 and 2025, matching the parallel deletion of the same words from s.115QA with retrospective effect from 5 July 2019.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2014-04-01, reported as Clause (34A) of section 10 of the Income-tax Act, 1961; as inserted, transcribed verbatim from section 5(V) of the Finance Act, 2013 at indiankanoon.org/doc/17335851/; in its later form reproduced verbatim by the ITAT Delhi in Rukmani Wires Pvt Ltd v. DCIT (29 August 2024) and by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025). It bears on section 10(34A), section 115QA, section 115QC, section 46A, section 48, section 2(22)(f), section Rule 40BB of the Income Tax Act 1961, in Capital Gains Exemptions, Capital Gains and How Tax Law Is Read matters.
Two things follow, and both come up constantly on pre-October-2024 buy-backs still under assessment or appeal. First, the exemption is triggered by the buy-back FALLING WITHIN s.115QA, not by the company having paid the right amount of tax. The ITAT Rajkot held on 21 August 2025 that there is no provision in either s.115QA or s.10(34A) empowering the Assessing Officer to withdraw the shareholder's exemption because the company paid too little, that the exemption "is not further dependent upon the actual tax payment by the company", and that the remedy for short payment lies against the company and its principal officer under s.115QC. That is a complete answer to the notice described in the question. Second, the exemption cuts both ways, and this is where taxpayers lose. If the buy-back falls within s.115QA, the income is exempt and the corresponding LOSS is not available either — a shareholder whose shares had a high cost cannot claim the shortfall as a capital loss. The escape from that, when it is available, is that the buy-back never fell within s.115QA at all: the ITAT Delhi held on 29 August 2024 that where the buy-back price is lower than the price at which the company issued the shares there is no "distributed income", so s.115QA "per se cannot be applied", and s.10(34A) "also consequentially would not have any application" — with the result that the shareholder's capital loss under s.46A read with s.48 survives. Third, note the boundary of the clause. It exempts income arising "on account of buy back of shares"; it does not exempt anything on a reduction of capital, on a liquidation distribution or on an ordinary sale of shares to a third party, and it never applied to a buy-back that s.115QA did not reach.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 5(V) of the Finance Act, 2013, transcribed verbatim, provides: "after clause (34), the following clause shall be inserted with effect from the 1st day of April, 2014, namely:— '(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA;'". In the form reproduced by the ITAT Delhi on 29 August 2024 and again by the ITAT Rajkot on 21 August 2025 the clause reads: "(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA". The second proviso to s.115QA(1), transcribed from incometaxindia.gov.in/w/section-115qa-12 (Year: 2025) and confirmed on /w/section-115qa-11 (Year: 2024 (No. 2)), reads: "Provided further that the provisions of this sub-section shall not apply in respect of any buy-back of shares, that takes place on or after the 1st day of October, 2024."
Not a judgment. The statutory position is that s.10(34A) exempts income arising to a shareholder on account of a buy-back of shares by a company as referred to in s.115QA; that it was inserted by the Finance Act, 2013 with effect from 1 April 2014 and as inserted was confined to shares not listed on a recognised stock exchange; and that because s.115QA does not apply to a buy-back taking place on or after 1 October 2024, the exemption has no operation for such a buy-back, the proceeds instead being a deemed dividend under s.2(22)(f).
Not a judgment; no judicial reasoning is stated for the clause itself. On the trigger, the ITAT Rajkot held on 21 August 2025 that "The exemption u/s 10(34A) triggers the moment the buyback of shares falls under section 115QA of the Act and the company becomes liable for payment of tax under the said section. This exemption is not further dependent upon the actual tax payment by the company." On the converse case, the ITAT Delhi held on 29 August 2024 that where the buy-back consideration is less than the issue price "there cannot be any distribution of income" so that s.115QA cannot be applied, and that "Since, we have already held that provisions of section 115QA of the Act per se cannot be made applicable to the facts of the instant case, the provisions of section 10(34A) also consequentially would not have any application."
any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA
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Handle my notice → Ask a CA on WhatsAppSection 10(34A) is a provision about buy-backs BEFORE 1 October 2024: it exempts in the shareholder's hands "any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA", and because the second proviso to s.115QA(1) switches that section off for any buy-back taking place on or after 1 October 2024, a buy-back from that date is no longer one "referred to in section 115QA" and the exemption has nothing to attach to — the proceeds are instead a deemed dividend under s.2(22)(f). The clause was inserted by the Finance Act, 2013 with effect from 1 April 2014, that is from AY 2014-15, and as originally enacted it was confined to buy-back of shares "(not being listed on a recognised stock exchange)"; the words of limitation had gone by the time the Tribunal reproduced the clause in 2024 and 2025, matching the parallel deletion of the same words from s.115QA with retrospective effect from 5 July 2019. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 10(34A), section 115QA, section 115QC, section 46A, section 48, section 2(22)(f), section Rule 40BB of the Income Tax Act 1961. It is reported as Clause (34A) of section 10 of the Income-tax Act, 1961; as inserted, transcribed verbatim from section 5(V) of the Finance Act, 2013 at indiankanoon.org/doc/17335851/; in its later form reproduced verbatim by the ITAT Delhi in Rukmani Wires Pvt Ltd v. DCIT (29 August 2024) and by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025). Two things follow, and both come up constantly on pre-October-2024 buy-backs still under assessment or appeal. First, the exemption is triggered by the buy-back FALLING WITHIN s.115QA, not by the company having paid the right amount of tax. The ITAT Rajkot held on 21 August 2025 that there is no provision in either s.115QA or s.10(34A) empowering the Assessing Officer to withdraw the shareholder's exemption because the company paid too little, that the exemption "is not further dependent upon the actual tax payment by the company", and that the remedy for short payment lies against the company and its principal officer under s.115QC. That is a complete answer to the notice described in the question. Second, the exemption cuts both ways, and this is where taxpayers lose. If the buy-back falls within s.115QA, the income is exempt and the corresponding LOSS is not available either — a shareholder whose shares had a high cost cannot claim the shortfall as a capital loss. The escape from that, when it is available, is that the buy-back never fell within s.115QA at all: the ITAT Delhi held on 29 August 2024 that where the buy-back price is lower than the price at which the company issued the shares there is no "distributed income", so s.115QA "per se cannot be applied", and s.10(34A) "also consequentially would not have any application" — with the result that the shareholder's capital loss under s.46A read with s.48 survives. Third, note the boundary of the clause. It exempts income arising "on account of buy back of shares"; it does not exempt anything on a reduction of capital, on a liquidation distribution or on an ordinary sale of shares to a third party, and it never applied to a buy-back that s.115QA did not reach. If it applies to you, the first step is this: Date the buy-back first. On or after 1 October 2024 there is no s.10(34A) case to make — the receipt is a s.2(22)(f) deemed dividend and the cost produces a capital loss under the s.46A proviso.
Section 5(V) of the Finance Act, 2013, transcribed verbatim, provides: "after clause (34), the following clause shall be inserted with effect from the 1st day of April, 2014, namely:— '(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA;'". In the form reproduced by the ITAT Delhi on 29 August 2024 and again by the ITAT Rajkot on 21 August 2025 the clause reads: "(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA". The second proviso to s.115QA(1), transcribed from incometaxindia.gov.in/w/section-115qa-12 (Year: 2025) and confirmed on /w/section-115qa-11 (Year: 2024 (No. 2)), reads: "Provided further that the provisions of this sub-section shall not apply in respect of any buy-back of shares, that takes place on or after the 1st day of October, 2024." The matter was decided on 2014-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Not a judgment. The statutory position is that s.10(34A) exempts income arising to a shareholder on account of a buy-back of shares by a company as referred to in s.115QA; that it was inserted by the Finance Act, 2013 with effect from 1 April 2014 and as inserted was confined to shares not listed on a recognised stock exchange; and that because s.115QA does not apply to a buy-back taking place on or after 1 October 2024, the exemption has no operation for such a buy-back, the proceeds instead being a deemed dividend under s.2(22)(f).
Not a judgment; no judicial reasoning is stated for the clause itself. On the trigger, the ITAT Rajkot held on 21 August 2025 that "The exemption u/s 10(34A) triggers the moment the buyback of shares falls under section 115QA of the Act and the company becomes liable for payment of tax under the said section. This exemption is not further dependent upon the actual tax payment by the company." On the converse case, the ITAT Delhi held on 29 August 2024 that where the buy-back consideration is less than the issue price "there cannot be any distribution of income" so that s.115QA cannot be applied, and that "Since, we have already held that provisions of section 115QA of the Act per se cannot be made applicable to the facts of the instant case, the provisions of section 10(34A) also consequentially would not have any application." In the words reproduced by the source cited on this page: "any income arising to an assessee, being a shareholder, on account of buy back of shares by the company as referred to in section 115QA"
It was decided by the CBDT Circulars & Instructions on 2014-04-01 and is reported as Clause (34A) of section 10 of the Income-tax Act, 1961; as inserted, transcribed verbatim from section 5(V) of the Finance Act, 2013 at indiankanoon.org/doc/17335851/; in its later form reproduced verbatim by the ITAT Delhi in Rukmani Wires Pvt Ltd v. DCIT (29 August 2024) and by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT (21 August 2025). Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 10(34A), section 115QA, section 115QC, section 46A, section 48, section 2(22)(f), section Rule 40BB, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Not a judgment. The statutory position is that s.10(34A) exempts income arising to a shareholder on account of a buy-back of shares by a company as referred to in s.115QA; that it was inserted by the Finance Act, 2013 with effect from 1 April 2014 and as inserted was confined to shares not listed on a recognised stock exchange; and that because s.115QA does not apply to a buy-back taking place on or after 1 October 2024, the exemption has no operation for such a buy-back, the proceeds instead being a deemed dividend under s.2(22)(f). It arises in Capital Gains Exemptions, Capital Gains and How Tax Law Is Read matters, on section 10(34A), section 115QA, section 115QC, section 46A, section 48, section 2(22)(f), section Rule 40BB of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For a pre-October-2024 buy-back where the officer attacks the company's s.115QA computation, take the jurisdictional point: the exemption depends on the buy-back falling within s.115QA, and short payment by the company is recovered from the company under s.115QC, not by denying the shareholder's exemption. Where the client made a LOSS on a pre-October-2024 buy-back, test whether s.115QA applied at all. If the buy-back price was below the amount the company received on issue of the shares (including premium, under Rule 40BB(2)), there was no distributed income, s.115QA did not apply, and s.10(34A) cannot bar the capital loss. For a buy-back in the AY 2014-15 to AY 2019-20 range, check whether the shares were listed. The clause as inserted was confined to shares not listed on a recognised stock exchange, and the limitation was removed only in step with the corresponding change to s.115QA from 5 July 2019. Do not stretch the clause. It reaches a buy-back of shares and nothing else — not a capital reduction, not a liquidation distribution, not a sale to a third party.
Validity check could not be completed. Validity check could not be completed on the current text of the clause. The words of the clause as inserted are certain — they are transcribed from the enacting section of the Finance Act, 2013 — and the later form without the listing restriction is certain to the extent that two tribunals reproduced it in identical words in August 2024 and August 2025. What is NOT verified is whether the Finance (No. 2) Act, 2024 textually amended clause (34A), because the departmental section 10 page truncates before clause (34) and no alternative government source for the clause was located. The practical conclusion stated in this entry does not depend on that: it follows from the second proviso to s.115QA(1), verified on two year-stamped departmental pages. A later pass should retrieve clause (34A) from a government source — the Finance (No. 2) Act, 2024 as published, or a CBDT explanatory circular on that Act — and confirm or correct the point. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This entry carries a retrieval gap that a later pass should close, and it is stated openly. `decided_on` is 1 April 2014, the commencement of the clause as inserted, taken from the words of the enacting provision itself: section 5(V) of the Finance Act, 2013, transcribed verbatim, reads "after clause (34), the following clause shall be inserted with effect from the 1st day of April, 2014, namely:— '(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA;'". I could NOT retrieve clause (34A) from a departmental page: incometaxindia.gov.in/w/section-10-65 is the Income-tax Act, 1961 page stamped Year 2025, but the fetch truncates at clause (12C) and never reaches clause (34), and /w/section-10-34a returns HTTP 404. The current-form text quoted in this entry — without the words "(not being listed on a recognised stock exchange)" — is taken from two independent tribunal orders that reproduce it in identical words: ITAT Delhi, 29 August 2024, at its paragraph 10, and ITAT Rajkot, 21 August 2025, at its paragraphs 29 and 38. I therefore have NOT verified from a government source whether the Finance (No. 2) Act, 2024 textually amended clause (34A) to cut it off at 30 September 2024. Two phrase searches for such wording returned nil, and a nil return on that index is not proof. The conclusion in this entry that the exemption cannot attach to a buy-back on or after 1 October 2024 does not rest on any such amendment: it rests on the second proviso to s.115QA(1), which I did verify on two year-stamped departmental pages, read with the ITAT Delhi's reasoning that where s.115QA cannot apply, s.10(34A) "consequentially would not have any application". The date on which the words "(not being listed on a recognised stock exchange)" left clause (34A) is likewise not established from a footnote; I infer only that they had gone by 29 August 2024 and note the parallel change to s.115QA dated by footnote to 5 July 2019. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Not a judgment. The statutory position is that s.10(34A) exempts income arising to a shareholder on account of a buy-back of shares by a company as referred to in s.115QA; that it was inserted by the Finance Act, 2013 with effect from 1 April 2014 and as inserted was confined to shares not listed on a recognised stock exchange; and that because s.115QA does not apply to a buy-back taking place on or after 1 October 2024, the exemption has no operation for such a buy-back, the proceeds instead being a deemed dividend under s.2(22)(f).
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