Amended and updated notes on section 115QA of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to tax on distributed income to shareholders.
Chapter XIIDA(Sections 115QA to 115QC) of the Income Tax Act 1961 deals with the provisions related to special provisions relating to tax on distributed income of domestic company for buy-back of shares. Section 115QA of IT Act 1961-2023 provides for tax on distributed income to shareholders.
Recently, we have discussed in detail section 115Q (when company is deemed to be in default) of IT Act 1961. Today, we learn the provisions of section 115QA of Income-tax Act 1961. The amended provision of section 115QA is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 115QA of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section-115QA: Tax on distributed income to shareholders
Section 115QA(1) of Income Tax Act
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).
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.
Section 115QA(2) of Income Tax Act
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 sub-section (1) shall be payable by such company.
Section 115QA(3) of Income Tax Act
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 fourteen days from the date of payment of any consideration to the shareholder on buy-back of shares referred to in sub-section (1).
Section 115QA(4) of Income Tax Act
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 therefor shall be claimed by the company or by any other person in respect of the amount of tax so paid.
Section 115QA(5) of Income Tax Act
No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the income which has been charged to tax under sub-section (1) or the tax thereon.