Private Limited Company has one of the best methods for distributing its profit to shareholders.


Purchasing of own shares (Buyback of shares) at higher value is a popular method of distributing profits. One of the recent instance where Infosys has spent around Rs.13000 crore to buyback of shares.

Before purchasing of own shares both Listed and Unlisted companies has to follow provisions of Company acts, 2013, SEBI Guidelines and many more.

We are here to read taxability on buyback of shares under the Income Tax Act, 1961 of ‘’Unlisted Shares’’. I have made efforts to summrised the provisions so that everyone can understand.

Taxability in hands of Company: Buyback of shares are covered under section 115QA of income tax act and this section describes that every unlisted company distributing its income to shareholders on buyback of shares shall be liable to pay income tax at the rate 20% on distributed income (plus Surcharge and Cess).

Taxability in hands of Shareholders: Income arising on account of buyback of shares of unlisted company is Exempt under section 10(34A) in the hands of shareholders.

It doesn’t matter who pays tax, because company is paying from your profits.

Keep reading! And reach out to us if you have any queries and you are looking for a CA in Gurgaon, Faridabad, Delhi for further clarification.

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