The department has raised a demand on my client company under section 115QA on a buy-back. Which buy-backs does the section actually reach, at what rate, on what figure, and is it still alive?
Section 115QA charges the COMPANY, not the shareholder, and it governs buy-backs from 1 June 2013 up to and including 30 September 2024 only: the second proviso to sub-section (1), inserted by Act No. 15 of 2024 with effect from 1 October 2024, provides that the 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". Within that window a domestic company is liable, in addition to the income-tax on its total income, to additional income-tax at twenty per cent on the "distributed income" — defined by the Explanation as the consideration paid on the buy-back reduced by the amount received by the company for issue of those shares, determined in the manner prescribed (Rule 40BB). Two dates cut across the window: until 5 July 2019 the section applied only to shares not listed on a recognised stock exchange, and the first proviso preserves that exclusion for a listed buy-back whose public announcement was made on or before 5 July 2019.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2013-06-01, reported as Section 115QA of the Income-tax Act, 1961, transcribed from incometaxindia.gov.in/w/section-115qa-12 (heading "Tax on distributed income to shareholders", Year: 2025) and read again word for word on incometaxindia.gov.in/w/section-115qa-11 (Year: 2024 (No. 2)); earlier states read on /w/section-115qa (Year: 2013), /w/section-115qa-5 (Year: 2020), /w/section-115qa-7 (Year: 2021) and /w/section-115qa-8 (Year: 2022); sub-sections (1) to (5) reproduced verbatim by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT, 21 August 2025. It bears on section 115QA, section 115QA(1), section 115QA(2), section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 2(22)(f), section 10(34A), section 46A, section Rule 40BB of the Income Tax Act 1961, in Capital Gains, How Tax Law Is Read and Demand, Recovery & Stay matters.
For anyone handling a live 115QA demand the section is far from academic — assessments, appeals and recoveries for buy-backs completed between 1 June 2013 and 30 September 2024 are still running, and the second proviso does nothing for them. Three features decide most of those disputes. First, the base. "Distributed income" is the buy-back consideration less the amount the COMPANY received when it issued the shares — not less what the tendering shareholder paid for them. Where shares were issued at a premium, Rule 40BB(2) puts the premium into the amount received, so the charge is measured from the issue price including premium. An officer who computes the charge from the shareholder's acquisition cost has used the wrong base. Second, the finality. Sub-section (4) makes the tax on distributed income "the final payment of tax in respect of the said income" with no further credit claimable by the company or by any other person, and sub-section (5) denies any deduction under any other provision of the Act, to the company or a shareholder, in respect of the income charged or the tax on it. That is what makes the 115QA charge a genuine cost rather than a prepayment. Third, the switch-off is by date of the buy-back, not by assessment year, so a company with a March-year-end may have buy-backs on both sides of 1 October 2024 in a single previous year, taxed under two entirely different regimes and in two different persons' hands. The rate is twenty per cent on the face of the section; the section does not itself carry surcharge or cess, which come from the Finance Act, and this entry does not state them.
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 115QA(1), as transcribed from the departmental page stamped Year 2025 and confirmed word for word on the page stamped Year 2024 (No. 2), reads: "115QA. (1) Notwithstanding anything contained in any other provision of this Act, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount of distributed income by the company on buy-back of shares from a shareholder shall be charged to tax and such company shall be liable to pay additional income-tax at the rate of twenty per cent on the distributed income: Provided that the provisions of this sub-section shall not apply to such buy-back of shares (being the shares listed on a recognised stock exchange), in respect of which public announcement has been made on or before the 5th day of July, 2019 in accordance with the provisions of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992): 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. Explanation.—For the purposes of this section,— (i) 'buy-back' means purchase by a company of its own shares in accordance with the provisions of any law for the time being in force relating to companies; (ii) 'distributed income' means the consideration paid by the company on buy-back of shares as reduced by the amount, which was received by the company for issue of such shares, determined in the manner as may be prescribed." Sub-sections (2) to (5) provide that the tax is payable even where no income-tax is payable on the company's total income; that the principal officer and the company must pay it within fourteen days of paying the buy-back consideration; that the tax is the final payment of tax on that income with no further credit to the company or any other person; and that no deduction under any other provision of the Act is allowed to the company or a shareholder in respect of that income or the tax on it. The Year 2013 page prints sub-section (1) with the words "(not being shares listed on a recognised stock exchange)" and with no proviso.
Not a judgment. The statutory position is that s.115QA charges a domestic company to additional income-tax at twenty per cent on the distributed income on a buy-back of its shares; that distributed income is the consideration paid reduced by the amount received by the company for issue of those shares determined in the prescribed manner; that from 5 July 2019 the charge extends to listed shares except where the public announcement was made on or before that date; and that by the second proviso the charge does not apply to any buy-back taking place on or after 1 October 2024.
Not a judgment; no judicial reasoning is stated for the section itself. On the base of the charge the ITAT Rajkot held on 21 August 2025 that the amount received by the company on issue of the shares, and not the tendering shareholder's cost, is the deduction the Explanation requires, so that where shares issued at Rs.25 (face value Rs.10 plus premium Rs.15) were bought back at Rs.26 the company had "correctly paid tax on Rs.1/- per share". On the reach of the charge the ITAT Delhi held on 29 August 2024 that where the buy-back price is lower than the issue price "there cannot be any distribution of income" and "provisions of Section 115QA of the Act per se cannot be applied".
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.
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Handle my notice → Ask a CA on WhatsAppSection 115QA charges the COMPANY, not the shareholder, and it governs buy-backs from 1 June 2013 up to and including 30 September 2024 only: the second proviso to sub-section (1), inserted by Act No. 15 of 2024 with effect from 1 October 2024, provides that the 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". Within that window a domestic company is liable, in addition to the income-tax on its total income, to additional income-tax at twenty per cent on the "distributed income" — defined by the Explanation as the consideration paid on the buy-back reduced by the amount received by the company for issue of those shares, determined in the manner prescribed (Rule 40BB). Two dates cut across the window: until 5 July 2019 the section applied only to shares not listed on a recognised stock exchange, and the first proviso preserves that exclusion for a listed buy-back whose public announcement was made on or before 5 July 2019. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 115QA, section 115QA(1), section 115QA(2), section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 2(22)(f), section 10(34A), section 46A, section Rule 40BB of the Income Tax Act 1961. It is reported as Section 115QA of the Income-tax Act, 1961, transcribed from incometaxindia.gov.in/w/section-115qa-12 (heading "Tax on distributed income to shareholders", Year: 2025) and read again word for word on incometaxindia.gov.in/w/section-115qa-11 (Year: 2024 (No. 2)); earlier states read on /w/section-115qa (Year: 2013), /w/section-115qa-5 (Year: 2020), /w/section-115qa-7 (Year: 2021) and /w/section-115qa-8 (Year: 2022); sub-sections (1) to (5) reproduced verbatim by the ITAT Rajkot in Bhikhalal Prahladrai Agarwal (HUF) v. ACIT, 21 August 2025. For anyone handling a live 115QA demand the section is far from academic — assessments, appeals and recoveries for buy-backs completed between 1 June 2013 and 30 September 2024 are still running, and the second proviso does nothing for them. Three features decide most of those disputes. First, the base. "Distributed income" is the buy-back consideration less the amount the COMPANY received when it issued the shares — not less what the tendering shareholder paid for them. Where shares were issued at a premium, Rule 40BB(2) puts the premium into the amount received, so the charge is measured from the issue price including premium. An officer who computes the charge from the shareholder's acquisition cost has used the wrong base. Second, the finality. Sub-section (4) makes the tax on distributed income "the final payment of tax in respect of the said income" with no further credit claimable by the company or by any other person, and sub-section (5) denies any deduction under any other provision of the Act, to the company or a shareholder, in respect of the income charged or the tax on it. That is what makes the 115QA charge a genuine cost rather than a prepayment. Third, the switch-off is by date of the buy-back, not by assessment year, so a company with a March-year-end may have buy-backs on both sides of 1 October 2024 in a single previous year, taxed under two entirely different regimes and in two different persons' hands. The rate is twenty per cent on the face of the section; the section does not itself carry surcharge or cess, which come from the Finance Act, and this entry does not state them. If it applies to you, the first step is this: Date the buy-back. If it took place on or after 1 October 2024, s.115QA does not apply at all and the charge lies on the shareholder under s.2(22)(f) — say so at the threshold rather than arguing quantum.
Section 115QA(1), as transcribed from the departmental page stamped Year 2025 and confirmed word for word on the page stamped Year 2024 (No. 2), reads: "115QA. (1) Notwithstanding anything contained in any other provision of this Act, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount of distributed income by the company on buy-back of shares from a shareholder shall be charged to tax and such company shall be liable to pay additional income-tax at the rate of twenty per cent on the distributed income: Provided that the provisions of this sub-section shall not apply to such buy-back of shares (being the shares listed on a recognised stock exchange), in respect of which public announcement has been made on or before the 5th day of July, 2019 in accordance with the provisions of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992): 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. Explanation.—For the purposes of this section,— (i) 'buy-back' means purchase by a company of its own shares in accordance with the provisions of any law for the time being in force relating to companies; (ii) 'distributed income' means the consideration paid by the company on buy-back of shares as reduced by the amount, which was received by the company for issue of such shares, determined in the manner as may be prescribed." Sub-sections (2) to (5) provide that the tax is payable even where no income-tax is payable on the company's total income; that the principal officer and the company must pay it within fourteen days of paying the buy-back consideration; that the tax is the final payment of tax on that income with no further credit to the company or any other person; and that no deduction under any other provision of the Act is allowed to the company or a shareholder in respect of that income or the tax on it. The Year 2013 page prints sub-section (1) with the words "(not being shares listed on a recognised stock exchange)" and with no proviso. The matter was decided on 2013-06-01 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.115QA charges a domestic company to additional income-tax at twenty per cent on the distributed income on a buy-back of its shares; that distributed income is the consideration paid reduced by the amount received by the company for issue of those shares determined in the prescribed manner; that from 5 July 2019 the charge extends to listed shares except where the public announcement was made on or before that date; and that by the second proviso the charge does not apply to any buy-back taking place on or after 1 October 2024.
Not a judgment; no judicial reasoning is stated for the section itself. On the base of the charge the ITAT Rajkot held on 21 August 2025 that the amount received by the company on issue of the shares, and not the tendering shareholder's cost, is the deduction the Explanation requires, so that where shares issued at Rs.25 (face value Rs.10 plus premium Rs.15) were bought back at Rs.26 the company had "correctly paid tax on Rs.1/- per share". On the reach of the charge the ITAT Delhi held on 29 August 2024 that where the buy-back price is lower than the issue price "there cannot be any distribution of income" and "provisions of Section 115QA of the Act per se cannot be applied". In the words reproduced by the source cited on this page: "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."
It was decided by the CBDT Circulars & Instructions on 2013-06-01 and is reported as Section 115QA of the Income-tax Act, 1961, transcribed from incometaxindia.gov.in/w/section-115qa-12 (heading "Tax on distributed income to shareholders", Year: 2025) and read again word for word on incometaxindia.gov.in/w/section-115qa-11 (Year: 2024 (No. 2)); earlier states read on /w/section-115qa (Year: 2013), /w/section-115qa-5 (Year: 2020), /w/section-115qa-7 (Year: 2021) and /w/section-115qa-8 (Year: 2022); sub-sections (1) to (5) reproduced verbatim 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 115QA, section 115QA(1), section 115QA(2), section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 2(22)(f), section 10(34A), section 46A, 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.115QA charges a domestic company to additional income-tax at twenty per cent on the distributed income on a buy-back of its shares; that distributed income is the consideration paid reduced by the amount received by the company for issue of those shares determined in the prescribed manner; that from 5 July 2019 the charge extends to listed shares except where the public announcement was made on or before that date; and that by the second proviso the charge does not apply to any buy-back taking place on or after 1 October 2024. It arises in Capital Gains, How Tax Law Is Read and Demand, Recovery & Stay matters, on section 115QA, section 115QA(1), section 115QA(2), section 115QA(3), section 115QA(4), section 115QA(5), section 115QB, section 115QC, section 2(22)(f), section 10(34A), section 46A, 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 buy-back inside the window, rebuild "distributed income" from the company's own share-issue records under Rule 40BB — subscription amount including premium, ESOP and sweat equity at rule 3(8) fair market value, bonus shares at nil, and the first-in-first-out rule for dematerialised shares that cannot be identified. If the officer has measured distributed income from the shareholder's cost rather than the issue price, take the point on the Explanation and Rule 40BB directly; that error has already been corrected by the Tribunal. For a listed-share buy-back around mid-2019, find the date of the public announcement under the SEBI (Buy-back of Securities) Regulations, 2018. An announcement on or before 5 July 2019 keeps the buy-back outside s.115QA under the first proviso even though the words excluding listed shares were themselves omitted from that date. Do not look for a credit or a deduction: sub-sections (4) and (5) shut out both, for the company and for the shareholder. Build the commercial case on the pricing, not on a later set-off. Check the collection machinery separately — the fourteen-day payment window in sub-section (3), the interest in s.115QB and the assessee-in-default consequence in s.115QC.
Still good law. The section remains on the statute book and continues to govern every buy-back that took place between 1 June 2013 and 30 September 2024; it is switched off prospectively for buy-backs on or after 1 October 2024, which is a change in the section's reach and not a repeal. The text is confirmed on two departmental pages with different "Year:" stamps (2024 (No. 2) and 2025) and, for sub-sections (1) to (5), by verbatim reproduction in a Tribunal order of 21 August 2025. This library already holds the Supreme Court's decision in Genpact India Pvt Ltd v DCIT (22 November 2019) on the appealability of a s.115QA order; I did not re-examine it for this entry. I did not check any constitutional challenge to the section. 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.
`decided_on` is the commencement of Chapter XII-DA, 1 June 2013, taken from the footnote on the Year 2013 departmental page — "Chapter XII-DA, consisting of sections 115QA to 115QC, inserted by the Finance Act, 2013, w.e.f. 1-6-2013" — and not from any page vintage. The two later amendments are dated from footnotes on the Year 2021 page, corroborated on the Year 2020 page: the words "(not being shares listed on a recognised stock exchange)" were "omit. by the Act No. 23 of 2019, w.r.e.f. 5-7-2019", and the first proviso was "Ins. by the Act No. 46 of 2019, w.r.e.f. 5-7-2019". Both are retrospective to 5 July 2019. Act No. 23 of 2019 and Act No. 46 of 2019 are commonly the Finance (No. 2) Act, 2019 and the Taxation Laws (Amendment) Act, 2019 respectively; the footnotes give only Act numbers and I have NOT verified the short titles, so this entry relies on the numbers. The second proviso is footnoted "Ins. by the Act No. 15 of 2024, w.e.f. 1-10-2024". One thing I could not date: the Year 2013 text defined "buy-back" by reference to s.77A of the Companies Act, 1956 and defined "distributed income" with no reference to any prescribed manner, whereas every page from Year 2020 onwards reads "in accordance with the provisions of any law for the time being in force relating to companies" and "determined in the manner as may be prescribed". No footnote naming the amending Act for that substitution appears on any page read, including the Year 2025 page, which prints only one footnote in total. The substitution can however be bounded: Rule 40BB, which is made "For the purposes of clause (ii) of the Explanation to sub-section (1) of section 115QA", carries the footnote "Inserted by the IT (Twenty-eighth Amdt.) Rules, 2016, w.r.e.f. 1-6-2016", so the prescription power was in force by 1 June 2016. The identity of the amending Act remains unestablished. Surcharge and cess on the twenty per cent are not stated in this entry because they come from the Finance Act and I did not verify them. 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.115QA charges a domestic company to additional income-tax at twenty per cent on the distributed income on a buy-back of its shares; that distributed income is the consideration paid reduced by the amount received by the company for issue of those shares determined in the prescribed manner; that from 5 July 2019 the charge extends to listed shares except where the public announcement was made on or before that date; and that by the second proviso the charge does not apply to any buy-back taking place on or after 1 October 2024.
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