Share buybacks have emerged as a popular corporate action in India, often used by companies to reward shareholders and optimise their capital structure. However, the taxation of buybacks has undergone a significant shift with the introduction of Budget 2026. This has left many investors, startup founders, and employees with questions about the implications on their tax outflows, reporting requirements, and post-tax returns.
Previously, companies bore the brunt of the buyback tax, making the process relatively straightforward for shareholders. However, Budget 2026 has redefined buyback taxation, moving the tax liability from companies to shareholders by categorising buyback proceeds as capital gains. This change has led to widespread confusion about how buyback transactions are now taxed and how to calculate the net returns.
In this article, we will break down the concept of share buybacks, the taxation rules before and after Budget 2026, and how these changes impact different types of investors.