Share buybacks have long been a popular way for companies to return cash to shareholders while often delivering tax-efficient gains. However, a key amendment in the Finance Bill 2026 introduces a flat 12% surcharge on capital gains from share buybacks, effective from April 1, 2026 . This change could meaningfully reduce your post-tax returns , especially if your taxable income falls below ₹1 crore. Understanding the Shift in Buyback Taxation In recent years, buyback taxation in India has seen multiple overhauls. Previously, companies paid a buyback distribution tax. Later changes treated proceeds as dividends in shareholders' hands, taxed at slab rates. The Budget 2026 largely reverts to taxing buybacks as capital gains at the shareholder level. You now calculate gains as: Capital Gain = Buyback Price – Cost of Acquisition Long-Term Capital Gains (LTCG) (holding > 1 year for listed equity shares): Taxed at 12.5% (with indexation benefits where applicable). Short-Te...
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