Section 69 · Computation of total income
Section 69 of the Income-tax Act, 2025 — Capital Gains on Buyback of Securities
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter IV
📜 What the law says — Section 69, Income-tax Act 2025
69. (1) If a shareholder or a holder of other specified securities receives any
consideration from any company for the purchase of its own shares or other
specified securities held by such shareholder or holder of other specified securi-
ties, then, subject to the provisions of section 72, the difference between the cost
of acquisition and the value of consideration so received shall be deemed to be the
“Capital gains” arising to such shareholder or the holder of other specified securities,
as the case may be, in the year in which the company purchases the shares or other
specified securities.
[(2) In respect of capital gains referred to in sub-section (1), where a company pur-
10
chases its own shares or other specified securities in accordance with the provisions
of section 68 of the Companies Act, 2013 (18 of 2013) and the shareholder or holder
of other specified securities is a promoter, the aggregate income-tax payable on such
capital gains shall be—
(a) the income-tax payable on such capital gains in accordance with the pro-
visions of this Act; and
(b) an additional income-tax in respect of capital gains specified in column B
of the Table below, computed at the rate specified in column C or column
D of the said Table:
TABLE
Sl. Income Rate, where the Rate, where the pro-
No. promoter is a moter is other than a
domestic company domestic company
A B C D
1. Short-term capital gains referred 2% 10%
to in section 196 arising from the
transfer of such securities.
2. Long-term capital gains referred 9.5% 17.5%
to in section 197 or section 198
arising from the transfer of such
securities.
(3) For the purposes of this section,—
(a) in the case of a company whose shares are listed on a recognised stock
exchange in India, ‘promoter’ shall have the same meaning as assigned to it
in regulation 2(k) of the Securities and Exchange Board of India (Buy-Back
of Securities) Regulations, 2018 made under the Securities and Exchange
Board of Ind
In plain language
What Section 69 is about
Section 69 of the Income-tax Act, 2025 is the charging provision that tells you how the money a shareholder receives when a company buys back its own shares or other specified securities is taxed. In plain words: when a company purchases its own shares back from you, the profit you make is treated as a capital gain in your hands, and Section 69 is the section that puts that transaction into the capital-gains net. It is the 2025 Act's re-enactment of the old Section 46A of the Income-tax Act, 1961.
Who it applies to
- Any shareholder or security-holder — individual, HUF, firm, company, NRI or FII — who tenders shares/specified securities to the issuing company in a buyback.
- Buybacks under the Companies Act, 2013 (Section 68), whether of a listed or an unlisted company. Section 69 borrows the meaning of "specified securities" from the Companies Act, so it covers shares and other securities notified under company law.
- It applies to the person whose shares are extinguished — not to the company doing the buyback.
How the gain is computed
The core rule is simple arithmetic: Capital gain = Buyback consideration received − Cost of acquisition of the tendered shares (indexation is not available for listed equity under the current regime). Whether the gain is short-term or long-term depends on your holding period for those shares.
- Long-term (listed equity held over 12 months) is taxed at 12.5% without indexation, after the annual ₹1.25 lakh LTCG exemption on listed equity.
- Short-term listed equity (STT-paid) is taxed at 20%.
- For unlisted shares, the normal LTCG rate of 12.5% / applicable STCG slab rules apply.
The important "deemed nil" twist you must know
Buyback taxation in India changed direction twice in a short span, and Section 69 carries the machinery for both outcomes:
- Deemed-dividend regime (1 Oct 2024 – 31 Mar 2026): the entire buyback amount was taxed as a dividend in the shareholder's hands at slab rates. To avoid double taxation, the law deemed the sale consideration to be NIL for capital-gains purposes and allowed the shareholder's cost of acquisition to be booked as a capital loss. Section 69 preserves this "deemed nil consideration" mechanic by cross-reference (the 2025 Act's deemed-dividend clause).
- From 1 April 2026 (Finance Act, 2026): the position shifts back to net capital-gains taxation — you are taxed only on the gain (consideration minus cost), not on the whole receipt.
How it interacts with other sections
- Cost of acquisition is picked up from the general capital-gains cost rules; if shares were acquired under ESOP/sweat equity, the FMV taxed earlier as salary becomes your cost.
- Capital loss set-off: where consideration is deemed nil, the resulting capital loss can be carried forward and set off against other capital gains under the loss-set-off provisions.
- Promoter buybacks may attract an additional levy/surcharge reported under the Finance Act, 2026 framework, producing higher effective rates for promoters than for ordinary investors.
Practical implications
- Keep your purchase contract notes / demat statements — cost of acquisition drives the entire calculation.
- Check which regime your buyback falls in: an offer that closed before 1 April 2026 is taxed as dividend; one on or after 1 April 2026 is taxed as capital gain on the net profit.
- Non-residents should also check the relevant Double Taxation Avoidance Agreement (DTAA), as treaty rates may modify the outcome.
💡 Example
Example 1 — Buyback on/after 1 April 2026 (capital-gains regime). Riya bought 1,000 listed shares of ABC Ltd for ₹200 each (cost ₹2,00,000) in 2022. In June 2026 ABC announces a buyback at ₹350 per share, so Riya receives ₹3,50,000. Her long-term capital gain = ₹3,50,000 − ₹2,00,000 = ₹1,50,000. After the ₹1.25 lakh LTCG exemption, ₹25,000 is taxable at 12.5% = ₹3,125 tax (plus cess).
Example 2 — Buyback in the deemed-dividend window (up to 31 Mar 2026). Suppose the same buyback had happened in February 2026. The entire ₹3,50,000 would be taxed as dividend at Riya's slab rate. Her sale consideration for capital gains is deemed nil, so she books a capital loss of ₹2,00,000 (her cost), which she can carry forward and set off against future capital gains — softening the blow.
A relatable story. Suresh, a retired schoolteacher, held Infosys-type shares for years. When his company offered a buyback in 2025, he was shocked to see the whole amount taxed as dividend at his slab rate. His CA explained the silver lining — the "deemed nil" rule let him claim the cost as a loss against gains from his mutual funds. A neighbour who tendered shares in a mid-2026 buyback had it easier: under Section 69's new avatar, he paid tax only on his actual profit, not the full cheque.
| Aspect | Deemed-dividend regime (1 Oct 2024 – 31 Mar 2026) | Capital-gains regime (from 1 Apr 2026) |
|---|
| What is taxed | Entire buyback consideration | Net gain (consideration − cost) |
| Head of income | Dividend (Income from Other Sources) | Capital Gains (Section 69) |
| Rate | Shareholder's slab rate | LTCG 12.5% / STCG 20% (listed equity) |
| Sale consideration for CG | Deemed NIL | Actual amount received |
| Cost of acquisition | Allowed as a capital loss | Reduced from consideration to arrive at gain |
| ₹1.25 lakh LTCG exemption | Not relevant (taxed as dividend) | Available on listed equity |
| 1961 Act equivalent | Section 46A |
Related sections
Section 67 — Mode of computation of capital gains Section 72 — Cost of acquisition of capital assets Section 198 — Tax on long-term capital gains (12.5%) Section 196 — Tax on short-term capital gains on securities Section 2(40) — Meaning of dividend (includes buyback deeming clause) Section 46A of the 1961 Act — Buyback (predecessor provision)
Frequently asked questions
Is buyback of shares taxable in the hands of the shareholder?
Yes. Under Section 69 of the Income-tax Act, 2025, buyback proceeds are taxable in the shareholder's hands. For buybacks on or after 1 April 2026 you pay tax on the net capital gain; for buybacks up to 31 March 2026 the whole amount was taxed as dividend.
What rate of tax applies to buyback gains from 1 April 2026?
For listed equity, long-term gains are taxed at 12.5% (after the ₹1.25 lakh annual exemption) and short-term gains at 20%. Unlisted shares follow the normal LTCG rate of 12.5% or slab rates for short-term gains.
What was the 'deemed nil consideration' rule?
During 1 Oct 2024 to 31 Mar 2026, because the whole buyback amount was taxed as dividend, the capital-gains sale consideration was deemed to be nil and the shareholder's cost of acquisition was allowed as a capital loss to prevent double taxation.
Does Section 69 replace Section 46A of the old Act?
Yes. Section 69 of the Income-tax Act, 2025 is the successor to Section 46A of the Income-tax Act, 1961, which dealt with capital gains on a company's purchase of its own shares or specified securities.
Can I claim the ₹1.25 lakh LTCG exemption on buyback gains?
Yes, for buybacks taxed as capital gains from 1 April 2026 on listed equity shares, the ₹1.25 lakh annual long-term capital gains exemption is available before applying the 12.5% rate.
Are promoters taxed differently on buybacks?
Reportedly yes. Under the Finance Act, 2026 framework an additional levy/surcharge applies to promoter participation in buybacks, giving promoters a higher effective rate than ordinary investors. Confirm the exact rate with a professional before filing.
Do NRIs pay tax on buyback of Indian shares?
Yes, NRIs are covered by Section 69, but they should check the relevant DTAA, as treaty provisions may reduce or alter the tax on capital gains from buyback of Indian company shares.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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