Moment guide · FY 2026-27

My company is doing a buyback

How is share buyback income taxed after October 2024?

Sec 2(22)(f)Sec 115QASec 46ASec 49Sec 70Verified 2026-08-11

For buybacks completed after 1-Oct-2024, the buyback consideration is deemed dividend u/s 2(22)(f) and taxed at your slab rate — the company no longer pays buyback tax (s.115QA repealed). The cost of shares tendered becomes a capital loss (sale consideration is Nil), which can be set off or carried forward as LTCG/STCG loss.

Your legitimate options

Every route the statute actually gives you — with its condition, cap and deadline.

Route	Condition	Cap / deadline
Deemed dividend route	Buyback completed after 1-Oct-2024 (FY 2026-27 buybacks)	Full buyback consideration taxed at slab rate u/s 2(22)(f)
Capital-loss route	On shares tendered in the buyback — sale consideration treated as Nil	Cost becomes LTCG/STCG loss; set-off u/s 70/71 and carry-forward u/s 74 (up to 8 years)
Legacy BBT route	Buyback completed before 1-Oct-2024	Company paid BBT u/s 115QA; shareholder proceeds were exempt

The #1 trap

The old 'buyback is tax-free in the shareholder's hands' rule is dead — for buybacks after 1-Oct-2024, the entire buyback consideration is deemed dividend u/s 2(22)(f) taxed at slab, and only the cost of tendered shares becomes a capital loss.

The decision path

Follow it top to bottom — the first condition that matches is your answer.

IF the buyback was completed after 1-Oct-2024 → entire consideration is deemed dividend u/s 2(22)(f), taxed at slab
IF you tendered shares in the buyback → cost of those shares becomes a capital loss (consideration Nil)
IF holding period > 24 months → LTCG loss; set off against LTCG and carry forward 8 years
IF holding period ≤ 24 months → STCG loss; set off against STCG/LTCG and carry forward 8 years
IF the buyback was completed before 1-Oct-2024 → old regime: company paid BBT, shareholder not taxable

Worked example

Karan, business head in an unlisted company

Karan is a business head in an unlisted fintech company. In December 2025 the board announced a buyback of 1,000 of his shares at ₹500 per share, completed on 15-Jan-2026 — after the 1-Oct-2024 cut-off. He received ₹5,00,000. His acquisition cost was ₹60 per share (₹60,000 total), and he had held the shares for 5 years, so they were long-term capital assets. Under FA 2024, the entire ₹5,00,000 buyback consideration is deemed dividend u/s 2(22)(f) and is taxed in his hands at slab rates. Karan is in the 30% bracket, so the tax is ₹5,00,000 × 30% = ₹1,50,000 plus 4% cess of ₹6,000, a total of ₹1,56,000. The company pays no buyback tax — s.115QA was repealed — so there is no 20% BBT to factor into his net proceeds. For capital gains, the buyback is treated as a transfer where the sale consideration is Nil; his ₹60,000 cost therefore becomes a long-term capital loss. Under s.70/71/74, Karan can set this LTCG loss against any long-term capital gains he earns in FY 2026-27 (for example, ₹60,000 of LTCG from selling other unlisted shares, wiping out that tax), and any unadjusted balance is carried forward for up to 8 years. Because the deemed dividend of ₹5,00,000 was not subjected to TDS, Karan must cover the ₹1,56,000 liability through advance tax instalments, with the last instalment due by 15-Mar-2027, to avoid interest u/s 234C. A quick call with us dials in the final figure.

Questions people actually ask

Is buyback income exempt in the shareholder's hands now?

No. For buybacks completed after 1-Oct-2024, the consideration is deemed dividend u/s 2(22)(f), taxable at your slab rate. The old exemption regime is gone.

Can I claim a capital loss on shares tendered in a buyback?

Yes. The sale consideration is treated as Nil for capital-gains purposes, so your cost becomes a capital loss — LTCG if held over 24 months, otherwise STCG — which can be set off and carried forward for 8 years.

Does the company still pay buyback tax (BBT)?

No. Section 115QA was repealed by FA 2024; companies no longer pay 20% BBT for buybacks completed after 1-Oct-2024.

What if my company's buyback was announced before 1-Oct-2024 but completed after?

The date of completion governs. If completed after 1-Oct-2024, the new deemed-dividend regime applies to you; the old BBT regime applies only to buybacks completed on or before 30-Sep-2024.

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Sections: 2(22)(f), 115QA, 46A, 49, 70, 71, 72 · Last verified 2026-08-11 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).