Union Budget 2026: Buybacks Now Taxed as Capital Gains, 30% for Non-Corporate Promoters

Finance Minister Nirmala Sitharaman, during her Budget 2026 speech in the Lok Sabha on Sunday, February 1, unveiled a significant overhaul of the share buyback taxation system.

Proceeds Now Treated as Capital Gains

Under the new rules, proceeds from share buybacks will be classified as capital gains for all shareholders, instead of being treated as dividend income. Previously, these proceeds were taxed at the shareholders’ applicable income tax slab rates, which could reach 30% or higher.

Differentiated Tax Rates for Promoters

The revised framework introduces specific rates:

• Corporate promoters: 22% effective buyback tax
• Non-corporate promoters: 30% effective buyback tax

This measure aims to curb the use of buybacks solely as a tax-saving tool.

The new rules, incorporated into the broader Income Tax Act, 2025, are scheduled to come into effect from April 1, 2026.

Also Read: Union Budget 2026: Deadline for Revised ITR Filing Extended to March 31

Impact on Share Buybacks

Earlier revisions to buyback taxation had caused a sharp decline in announcements by companies. This new framework is expected to make buybacks more attractive while maintaining fair taxation.

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