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Provisions of section 10(34A) exempt any income arisen to the shareholder on account of buy back of shares as referred under section 115QA of the Income Tax Act. The exemption provisions of section 10(34A) of the Income Tax Act are explained in the present article.

Understanding the provisions of section 10(34A) of Income Tax Act

Exemption provisions of section 10(34A) state as under-

  • The income arisen to the shareholders on account of buy back of shares by the company is exempted from income tax.
  • However, the buy back of shares by the company should have been taxed under section 115QA of the Income Tax Act.

In nut-shell, any income arising to the shareholders due to buy back of shares by the company, as referred to in section 115QA, is exempt from income tax in terms of section 10(34A).

Since section 10(34A) exemption is connected with the provisions of section 115QA, it gets essential to understand the basics of the same, which are explained hereunder.

Basics of provisions of section 115QA of Income Tax Act-

The provisions of section 115QA simply state that the domestic company distributing income by way of buy back of shares are required to pay an additional income tax @20% on such distributed income.

Thus, in order to avoid double taxation, since the tax on buy-back of shares is already paid by the domestic company in terms of section 115QA. The same is exempted in the hands of the shareholders in terms of exemption section 10(34A) of the Income Tax Act.

Amount of exemption available under section 10(34A)

There is no maximum (upper) limit fixed under the Act. The entire amount of income arising on buy-back of shares is allowed as an exemption to the shareholders only in case the company has paid tax as per provisions of section 115QA.

Table – Articles on Section 10 Exemptions

Sr. No. Particulars
1 Section 10(1)– Exemption to Agricultural Income
2 Section 10(2) Exemption to amount received by co-parcener from HUF
3 Section 10(2A) Exemption towards share of income from firm/LLP
4 Exemptions towards interest to non-residents | Section 10(4) & 10(4B)
5 Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company
6 Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India
7 Exemption- Section 10(8A) & section 10(8B) of Income Tax Act
8 Exemption towards commuted value of pension Section 10(10A)
9 Exemption towards retrenchment compensation received by workman Section 10(10B)
10 Section 10(10BC) Exemption towards compensation received on account of any disaster
11 Section 10(10C) Exemption of amount received on voluntary retirement
12 Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)
13 Section 10(10D) Exemption towards amount received under a Life Insurance Policy
14 Exemption for amount received from Statutory & Recognized PF
15 Exemption for payment from approved superannuation fund Section 10(13)
16 Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)
17 Section 10(15) Exemption- Interest on Bonds, Debentures, Securities
18 Scholarship exemption | Section 10(16) | Income Tax Act 1961
19 Exemption towards income for administration of Charitable or Religious Institution
20 Section 10(32) Exemption | Income of minor clubbed with parent
21 Exemption for dividend income received from Indian Company | Section 10(34)
22 Section 10(34A) Exemption towards income received by a shareholder on buy back of shares
23 Section 10(35) Exemption towards income received from units
24 Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land

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April 2024