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—share-buyback-tax-capital-gains-promoter-2026-india [2026/07/22 17:47] (current) – created - external edit 127.0.0.1
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 +{{htmlmetatags>metatag-title=(Buyback Tax 2026: Capital Gains Return, Promoters Pay Extra)&metatag-description=(From 1 April 2026 a share buyback is taxed as your capital gain again. Ordinary shareholders pay no extra tax, but promoters face an added income-tax.)&metatag-keywords=(buyback tax 2026 capital gains, share buyback tax India, promoter buyback tax, Finance Act 2026)&metatag-robots=(index,follow)&metatag-og:title=(Buyback Tax 2026: Capital Gains Return, Promoters Pay Extra)&metatag-og:description=(From 1 April 2026 a share buyback is taxed as your capital gain again. Ordinary shareholders pay no extra tax, but promoters face an added income-tax.)&metatag-og:type=(article)}}
 +
 +====== Buyback Tax 2026: Capital Gains Return, Promoters Pay Extra ======
 +
 +
 +
 +{{ :social:auto:share-buyback-tax-capital-gains-promoter-2026-india.png?direct&1200 |Buyback Tax 2026: Capital Gains Return, Promoters Pay Extra — RTI Wiki}}
 +
 +<WRAP center round info 95%>
 +**Quick Reply:** From 1 April 2026 a share buyback is taxed as your capital gain again. Ordinary shareholders pay no extra tax, but promoters face an added income-tax.
 +</WRAP>
 +
 +A company has offered to buy back your shares and you want to know the tax. From 1 April 2026 the answer depends on one thing: whether you are an ordinary shareholder or a promoter. This guide gives you the direct answer first, then a worked example, then the exact rule for promoters.
 +
 +<WRAP info>
 +**If you are an ordinary shareholder (you are not a promoter):** You pay tax only on your capital gain, at the normal capital-gains rate. There is **no extra buyback tax** on you. This is the headline answer for most readers.
 +
 +**If you are a promoter or a large holder (more than 10% of the company):** You pay the normal tax on your capital gain **plus** an additional income-tax set by the Finance Act, 2026. The extra rate depends on whether you are a domestic company and whether the gain is short-term or long-term. See the table below.
 +</WRAP>
 +
 +===== A worked example: an ordinary shareholder tenders shares =====
 +
 +Meet an everyday retail investor, the sort of person Dr. Shrawan Kumar Pathak wrote this guide for. Say you bought 100 shares at ₹200 each, so your cost was ₹20,000. The company announces a buyback at ₹350 per share and accepts all 100. You receive ₹35,000.
 +
 +  - Your **capital gain** is ₹35,000 minus ₹20,000, which is ₹15,000.
 +  - Because you are **not** a promoter, you pay tax only on that ₹15,000 gain, at the normal capital-gains rate that applies to your holding period.
 +  - You pay **no additional buyback tax**. Nothing extra is added on top.
 +
 +That is the whole calculation for a retail shareholder. The buyback money is your sale price, your cost is subtracted, and the gain is taxed like any other capital gain. If you held the shares long enough to qualify as long-term, the long-term capital-gains rules apply; if not, the short-term rules apply.
 +
 +===== The extra tax that promoters pay =====
 +
 +If you are a promoter, the Finance Act, 2026 adds a second layer on top of your normal capital-gains tax. Section 42 of the Act rewrites sub-sections (2) and (3) of section 69 of the Income-tax Act, 2025. Where a company buys back its own shares under section 68 of the Companies Act, 2013 and the seller is a promoter, the promoter pays the normal income-tax on the capital gain **and** an additional income-tax at these rates:
 +
 +^ Type of capital gain ^ Rate if the promoter is a domestic company ^ Rate if the promoter is not a domestic company ^
 +| Short-term capital gain (section 196) | 2% | 10% |
 +| Long-term capital gain (section 197 or 198) | 9.5% | 17.5% |
 +
 +Who counts as a promoter? For a listed company, "promoter" has the meaning given in regulation 2(k) of the SEBI (Buy-Back of Securities) Regulations, 2018. For any other company, it means a promoter under section 2(69) of the Companies Act, 2013, or **any person who holds, directly or indirectly, more than 10% of the shareholding**. So a large holder can be caught even without the promoter label.
 +
 +You can read the enacted law yourself in the Finance Act, 2026 at https://egazette.gov.in/WriteReadData/2026/271439.pdf . The additional-income-tax table above is the operative statutory rule.
 +
 +A word on the "22 percent" and "30 percent" figures you may have seen in the news. In the Budget 2026-27 speech on 1 February 2026, the Finance Minister described the **effective** burden on promoters as "22 percent for corporate promoters and 30 percent for non-corporate promoters" (PIB, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2221455 ). That was her characterisation of the combined effect, not a rate written into the Act. The rate the Act actually imposes is the additional income-tax in the table above.
 +
 +===== What changed, and from when =====
 +
 +Under the rule that took effect in **October 2024**, buyback proceeds were taxed in the shareholder's own hands as a **deemed dividend** at slab rates, with no deduction for cost. Our older guide, [[https://righttoinformation.wiki/share-buyback-tax-shareholder-budget-2024-india|Share buyback tax under the 2024 deemed-dividend rule]], explains that position. Please note it describes the law **before 1 April 2026** and no longer reflects how a buyback is taxed today.
 +
 +The Union Budget 2026-27, presented on 1 February 2026, announced a reversal to **capital-gains treatment** plus an extra tax on promoters. The Finance Act, 2026 (No. 4 of 2026), which received assent on 30 March 2026, enacted it. Two sections do the work:
 +
 +  - **Section 42** substitutes sub-sections (2) and (3) of section 69 of the Income-tax Act, 2025, bringing in capital-gains treatment and the promoter additional-tax table.
 +  - **Section 36** amends section 7(2)(a) of the Income-tax Act, 2025, which is the change that takes buyback consideration back **out** of the definition of "dividend".
 +
 +When does the change start? The commencement clause of the Finance Act, 2026, clause 1(2)(a), says that "sections 2 to 129" come into force on the **1st day of April, 2026**. Section 42 sits inside that range. So the capital-gains treatment of buybacks applies from **1 April 2026**. That is the only start date for this change.
 +
 +===== Frequently asked questions =====
 +
 +==== I am a small shareholder. Do I pay the extra promoter tax? ====
 +No. The additional income-tax applies only to a promoter or to a person holding more than 10% of the company. An ordinary retail shareholder pays tax only on the capital gain at the normal rate, with nothing extra.
 +
 +==== How is my gain worked out on a buyback? ====
 +Your gain is the buyback price you receive minus the cost of the shares. If you bought 100 shares for ₹20,000 and the buyback pays ₹35,000, your capital gain is ₹15,000. You are taxed on that gain as short-term or long-term depending on how long you held the shares.
 +
 +==== Are the "22 percent" and "30 percent" figures the rates in the law? ====
 +No. Those were the Finance Minister's description of the effective burden on corporate and non-corporate promoters in the Budget speech. The rates written into the Finance Act, 2026 are the additional income-tax of 2%, 10%, 9.5% and 17.5% shown in the table above.
 +
 +==== Was buyback money not taxed as a dividend before? ====
 +Yes. From October 2024 until 31 March 2026, buyback proceeds were taxed in the shareholder's hands as a deemed dividend at slab rates. From 1 April 2026 that changed to capital-gains treatment. Our earlier guide covers the old dividend rule.
 +
 +==== Who is treated as a promoter for a listed company? ====
 +For a listed company, "promoter" carries the meaning in regulation 2(k) of the SEBI (Buy-Back of Securities) Regulations, 2018. For an unlisted company it is a promoter under section 2(69) of the Companies Act, 2013, or anyone holding more than 10% of the shares directly or indirectly.
 +
 +===== Next steps =====
 +
 +  - Work out whether you are a promoter or a large holder. If you hold 10% or less and are not named as a promoter, the extra tax does not touch you.
 +  - Keep your purchase records so you can prove your cost and compute the gain correctly.
 +  - If a company or registrar will not give you the buyback records, offer document, or acceptance ratio you are entitled to, you can use the [[https://righttoinformation.wiki/tools/rti-drafter|AI RTI Drafter]] to frame a request, and if a public authority is involved, the [[https://righttoinformation.wiki/tools/first-appeal|First Appeal Builder]] for a section 19(1) appeal.
 +  - New to RTI and want the full method for getting official records, start with [[https://righttoinformation.wiki/book|The RTI Playbook]].
 +
 +**Primary sources:** The Finance Act, 2026 (No. 4 of 2026), https://egazette.gov.in/WriteReadData/2026/271439.pdf . Highlights of Union Budget 2026-27, PIB, 1 February 2026, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2221455 .
 +
 +{{tag>income-tax buyback tax capital gains return promoters pay}}