BUYBACK GETS ITS SHEEN BACK

PROCEEDS TO BE TREATED AS CAPITAL GAINS; TCS ON OVERSEAS TRAVEL, STUDY CUT TO 2%

- NARAYANAN V

RETAIL INVESTORS ARE likely to pay less tax on share buybacks after the Union Budget 2026-27 announced that buyback proceeds will now be taxed as capital gains, instead of being added to personal income and taxed at income tax slab rates, which ranges from 5% to 30%.

“It is proposed that the consideration received by a shareholder on buyback of shares by a company shall be chargeable to tax under the head ‘Capital Gains’ instead of being treated as dividend income,” Finance Minister Nirmala Sitharaman said in her Budget speech.

The move marks a reversal of the buyback taxation framework introduced in 2024, under which buyback proceeds were treated as dividend income and taxed in the hands of shareholders at applicable slab rates. Amit Maheshwari, managing partner, AKM Global, a tax and consulting firm, explained that earlier, share buybacks were taxed mainly at the company level, with shareholders facing uneven or unclear outcomes. “After the 2024 change, buyback proceeds are taxed in the hands of shareholders, often at applicable slab rates, on the entire receipt without allowing deduction for the cost of acquisition,” he added.