Read the following case study and answer the question.

Surya Ltd issued 10,000 equity shares of ₹50 each at a premium of 10%. The company received application for 13,000 shares. The amount was payable as: on application 30%, on allotment 30% plus Premium, on 1st call 10% and Balance on final call. Allotment was made pro-rata for all applicants. Excess application money received is to be adjusted on allotment. Company received all money called except from Manan, an applicant, of 390 shares, Manan Paid only application money. His shares were forfeited and 70% of the forfeited shares were reissued as fully paid for ₹40 each.

Balance of Securities Premium can be utilised for

Buy Back of Shares

The correct answer is Option (3) → Buy Back of Shares.

The premium amount is credited to a separate account called ‘Securities Premium Account’ and is shown under the title ‘Equity and Liabilities’ of the company’s balance sheet under the head ‘Reserves and Surpluses’. It can be used only for the following five purposes:
(a) to issue fully paid bonus shares to the extent not exceeding unissued share capital of the company;
(b) to write-off preliminary expenses of the company;
(c) to write-off the expenses of, or commission paid, or discount allowed on any securities of the company;
(d) to pay premium on the redemption of preference shares or debentures of the company.
(e) Purchase of its own shares (i.e., buy back of shares).