Overview
- Buyback proceeds will be taxed on actual gains, with long-term capital gains at 12.5% and short-term gains on listed shares at 20%, the Income Tax Department clarified.
- Promoters face an extra buyback levy, taking effective rates to about 22% for domestic corporate promoters and about 30% for non-corporate or non‑domestic promoters.
- Effective April 1, the reform moves taxation to shareholders and removes the company-level buyback distribution tax, leading companies to reassess dividends versus buybacks.
- The shift restores loss set-off and carry-forward and ends the 2024 dividend-style approach that taxed gross receipts and relied on an extinguishment-loss workaround.
- Promoter status will follow SEBI rules for listed firms and the Companies Act or a holding above 10% for unlisted firms, a scope experts warn could also capture PE/VC investors without control.