Under Section 115QA to Section 115QC, all the Special Provisions relating to Tax on Distributed Income of Domestic Company for Buy Back of Shares are described in details as given below :
1. Tax on Distributed Income to Shareholders [Section 115QA]
(A) [Section 115QA(1)]: Additional Income-Tax on Buy Back of Shares
(i) In addition to the income-tax payable by the company on its total income as per the provisions of the Act, the domestic company shall be liable to pay additional income-tax @ 20% on any amount of distributed income paid by the company on buy back of shares [whether listed or unlisted].
| Meaning of buy back [Explanation (i) to section 115QA (1)]:
“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 Meaning of Distributed Income [Explanation (ii) to section 115QA (1)]: “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. See rule 40BB in this regard. |
(ii) Rate of Additional Income-Tax: 20% + 12% SC + 4% H&EC i.e. 23.296%.
| Meaning of distributed income [Explanation (ii) to section 115QA (1)]:
“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 Lthma1mer as may be prescribed. See rule 40BB in this regard. |
(B) [Section 115QA (2)]: Additional income-tax payable even if the total income of domestic company is exempt
Notwithstanding that no income-tax is payable by a domestic company on its total income computed in accordance with the provisions of this Act, the tax on the distributed income under section 115QA (1) shall be payable by such company.
(C) [Section 115QA (3)]: Time limit for deposit of additional income-tax
The principal officer of the domestic company and the company shall be liable to pay the tax to the credit of the Central Government within 14 days from the date of payment of any consideration to the shareholder on buy-back of shares referred to in section 115QA (1).
(D) (Section 115QA (4)]: Additional income-tax paid to be treated as final payment
The tax on the distributed income by the company shall be treated as the final payment of tax in respect of the said income and no further credit therefore shall be claimed by the company or by any other person in respect of the amount of tax so paid.
(F) [Section 115QA(5)]: Income charged to tax not allowed as deduction to the company or the shareholder
No deduction under any other provision of this Act shall be allowed to—
(a) the company; or
(b) a shareholder
in respect of the income which has been charged to tax under section 115QA(1) or the tax thereon.
2. [Section 115QB]: Interest payable for delayed payment of Tax
Where the principal officer of the domestic company and the company fails to pay the whole or any part of the tax on the distributed income referred to in section 115QA(1), within the time allowed under section 115QA(3) of that section, he or it shall be liable to pay simple interest @ 1% for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid.
3. [Section 115QC]: When Company is Deemed to be assessee in default
If any principal officer of a domestic company and the company does not pay tax on distributed income in accordance with the provisions of section 11 5QA, then, he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply.
Exemption to the shareholder on account of buy back of shares [Section 10(34A)]
Since, the company has to pay additional income-tax on buy back of shares, any income arising to an assessee, being a shareholder, on account of buy back of shares (including listed on recognised stock exchange), shall be exempt.
