Income tax rule changes from 1st April 2026. How will it impact the buyback of shares? Explained

New 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.

Stock market investors should review their shareholdings and track any buyback announcements by companies in their portfolio during the current financial year. Under the new income tax rules 2026, the tax treatment for buyback of shares has shifted from a dividend-based model to a capital gains model.

Buyback of shares: New income tax rule 2026

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.

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 was 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.

Income tax calculation under the new rule

Solanki said that the new income tax rule 2026 proposes a capital gains model for benefits received from share buybacks. Under this rule, STCG or 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. The period will be considered from the date of buying the stock to the buyback record date. For more than one year difference between the date of buying the stock and the buyback record date, LTCG will be applicable,” 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.

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