## Capital Gains on Buyback of Shares or Specified Securities [Section 46A]
The treatment of a buyback depends on what is bought back.
### A. Buyback of specified securities (other than shares of a domestic company)
| Item | Treatment |
|---|---|
| Applicability | Specified securities (other than shares of a domestic company) bought back by the issuing company |
| FVC | Consideration received on buyback |
| COA | Amount paid at the time of purchase of the securities |
| Year of taxability | Year of buyback |
| Mode of computation | As per Section 48 (non-depreciable assets format) |
| "Specified securities" | Meaning as per Section 68 of the Companies Act, 2013 |
### B. Buyback of shares by domestic companies (on or after 1 October 2024)
When a domestic company (listed or unlisted) buys back its shares on or after 1-Oct-2024:
1. In the shareholder's hands — IFOS: The amount received is treated as dividend income, taxable under "Income from Other Sources."
2. Under Capital Gains: For the purpose of Sec 46A, the FVC is taken as NIL. Hence:
- Capital Loss = FVC (NIL) − COA → this is a capital loss (LTCL or STCL depending on holding period).
3. Set-off & carry forward [Sec 70, 71, 74]:
- LTCL can be set off only against LTCG.
- STCL can be set off against any capital gains (LTCG or STCG).
- Any balance loss is carried forward.
Memory hook: Post-1-Oct-2024 domestic buyback flips the old rule: the entire receipt is dividend (IFOS) in the shareholder's hands, and the capital gains computation deliberately gives a loss (FVC = NIL) equal to the cost — which the shareholder can then set off / carry forward.