Buyback of Securities & Differential RightsMCQQuestion 5722 of 6

What is the tax treatment of buyback of shares by an unlisted company?

Options

AThe buyback is taxable as a capital gain in the hands of the shareholder

BThe buyback is taxable as a dividend in the hands of the shareholder

CThe buyback is exempt from tax in the hands of the shareholder

DThe buyback is taxable as a business income in the hands of the shareholder

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Correct Answer

✅ Option A — The buyback is taxable as a capital gain in the hands of the shareholder

All Options:

AThe buyback is taxable as a capital gain in the hands of the shareholder ✓
BThe buyback is taxable as a dividend in the hands of the shareholder
CThe buyback is exempt from tax in the hands of the shareholder
DThe buyback is taxable as a business income in the hands of the shareholder

Detailed Solution & Explanation

The buyback of shares by an unlisted company is taxable as a capital gain in the hands of the shareholder. This is because the shareholder is realizing a gain on the sale of the shares.

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