New income tax rules 2026 on buyback of shares: The difference between the buyback price and the acquisition cost will be taxed as STCG or LTCG, depending on the holding period.(Photo: Pixabay)AI Quick ReadNew income tax rules 2026 on buyback of shares: After ushering in the new financial year 2026-27, earning individuals have been busy finalising their financial plans, keeping in mind the income tax rule changes from 1st April 2026.
Those investing in the stock market are advised to check their shareholding and any buyback announced by their portfolio stocks in the current financial year. Under the new income tax rules 2026, the income tax treatment for the buyback of shares has shifted from a dividend-based model to a capital gains model.
Speaking on the income tax rule changes from 1st April 2026, Pankaj Mathpal, CEO & MD at Optima Money Managers, said, “For any share buybacks announced on or after 1st April 2026, for individual taxpayers, the tax liability has shifted from a dividend-based model to capital gains. The difference between the buyback price and the cost of acquisition will be taxable as STCG or LTCG, depending on the holding period.”
Pankaj Mathpal of Optima Money Managers said the new income rule 2026 for share buybacks will apply to non-promoter shareholders of the company.
Highlighting the income tax rule change from April 2026 on the share buyback, SEBI-registered tax and investment expert Jitendra Solanki, said, “Before 1 April 2024, companies were required to pay 20% tax on the amount utilised for share buybacks, while the net proceeds received by shareholders were exempt under Section 10 of the Income Tax Act.”
However, for the period from 1 April 2024 to 31 March 2025, any money received by a shareholder from a company under a share buyback is treated as a deemed dividend, taxable at the individual’s slab rate. Shareholders tendering their stock in the buyback offer receive the entire amount, which is taxable as dividend income in their hands, with no deduction allowed for the cost of acquiring the shares.
Solanki said that the new income tax rule 2026 proposes a capital gains model for benefits received from share buybacks. Under this rule, STCG on LTCG will apply depending on the holding period.
“If the buyback of shares has been announced within one year of the shareholding, then in that case, STCG will become applicable. However, the period will be considered from the date of buying the stock to the buyback record date. For more than one year, the time difference between the date of buying and the buyback record date, LTCG will be applied,” Solanki said.
However, the one-year LTCG rule on share buybacks applies to listed shares. For unlisted shares, the holding period for LTCG is 24 months, and the rate is 20% with indexation benefits.
“STCG on the share buyback is taxed as per the income tax slab applicable on your income, whereas the LTCG is flat 12.50% on gain exceeding ₹1.25 lakh in the financial year,” said Pankaj Mathpal.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
Asit Manohar has nearly two decades of experience in the mainstream media. In this period, he has served esteemed media organisations like NDTV Profit, The Economic Times, and Zee Business. He has been working at LiveMint Digital since April 2021. During these two decades of journey in mainstream media, Asit has mainly covered external affairs, markets and personal finance. However, his earliest beats include railways, SME, MSME, and politics (Congress beat). Some of his features on political, economic, and foreign policy are documented in the parliamentary records.
While pursuing his MA (Mass Communication, Session 2004-06), Asit began his media career as a stringer at All India Radio in Varanasi. At AIR Varanasi, Asit worked with the Gyanvani, Yuvvani and Vividh Bharti teams. After working for nearly one year at AIR Varanasi, he shifted to print journalism and started working as a stringer for the HT Media Ltd, Varanasi. At HT Media Ltd in Varanasi, he covered the BHU beat.
Asit has also worked with some brokerage houses. He has worked with Religare Broking and India Infoline, where he assisted the research team in developing and executing trade strategies for intraday cash, F&O, and commodities.
Asit is a Gold Medalist in MA (Mass Communication) from BHU, Varanasi. He did his BSc. (Hons) in Mathematics from Magadh University, Bodh Gaya. Asit was a National Talent Scholarship holder during his senior secondary studies (1988-91).