Finance Minister Nirmala Sitharaman today proposed that consideration received by a shareholder on a buyback will be taxed as capital gains rather than being treated as dividend income.
Union Budget 2026: Buyback Payouts to Be Treated as Capital Gains; Promoters Face 22%–30% Tax
Sitharaman said the change in the taxation framework was aimed at curbing the improper use of buybacks as a tax-efficient route for promoters
capital gains tax
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She also announced a differentiated tax structure for promoters: an effective rate of 22% for promoter entities that are domestic companies, and 30% for promoters that are not domestic companies.
Sitharaman said the change in the taxation framework was aimed at curbing the improper use of buybacks as a tax-efficient route for promoters.
“In the interest of minority shareholders, I propose to tax buyback for all types of shareholders as capital gains. However, to disincentivise misuse of tax arbitrage, promoters will pay an additional buyback tax,” she said. “This will make the effective tax 22% for corporate promoters. For non-corporate promoters, the effective tax will be 30%.”
[This is a developing story]
