Share Buyback Taxation in India 2026: Back to Capital Gains From April 2026

Buyback taxation in India has changed twice in two years. Until September 2024 the company paid the tax and the shareholder received buyback proceeds tax-free. From October 1, 2024 the whole amount was taxed as dividend in the shareholder's hands. Finance Act 2026, which received the President's assent on March 30, 2026, reversed that again. From April 1, 2026, buyback proceeds are taxed as capital gains for shareholders, and promoters face an additional tax. Here is what applies to a buyback you tender into today.

The Three Regimes in Brief

What Changed From April 1, 2026

Finance Act 2026 moves buyback consideration out of the dividend framework and back into capital gains. The shareholder deducts the cost of the shares from the buyback price, and the difference is a capital gain. Whether it is short-term or long-term depends on how long you held the shares, and it is taxed at the usual capital-gains rates, so check the current rates for listed shares in our capital gains guides before you tender. The odd result of the dividend regime, where your purchase cost became a capital loss you could not use against the dividend tax, no longer arises.

What Promoters Pay

To discourage promoters from using buybacks as a tax-efficient way to extract cash, the Act adds an additional tax on promoter shareholders under Section 69 of the Income-tax Act, 2025. Reported aggregate rates are 22% for promoter companies and 30% for other promoters, and the additional tax is restricted to buybacks under Section 68 of the Companies Act, 2013. Sources differ on how the surcharge on this additional tax works, so a promoter should read the enacted text or take professional advice before tendering.

A Worked Example

Say an investor bought listed shares at ₹500 and tenders them into a buyback at ₹1,500 after holding them for more than a year. Under the October 2024 to March 2026 rule, the full ₹1,500 was added to income and taxed at slab rate, which is roughly 30% plus surcharge and cess at the top bracket, and the ₹500 cost became a capital loss. From April 1, 2026, the gain is ₹1,000 (₹1,500 less ₹500), and it is taxed as a long-term capital gain.

What About Buybacks Before April 2026?

The dividend treatment applied to buybacks completed between October 1, 2024 and March 31, 2026. If you tendered shares in that period, the proceeds were taxed as dividend and your cost became a capital loss, which you could set off against other capital gains or carry forward for up to 8 assessment years under the capital loss set-off and carry-forward rules.

Bottom Line

For a buyback from April 1, 2026, work out your gain as buyback price less your purchase cost, and check whether it is short-term or long-term. Minority shareholders are better off than they were under the dividend rule; promoters face an additional tax. Read your broker's contract note and the company's offer letter to confirm how tax and any TDS are being handled on your buyback.