💰 Tax Savings · Structure & split income
Buyback vs dividend — how the tax changed (Oct 2024)
✍️ EaseValue Advisors · Updated 18 Jul 2026 · FY 2025-26
In short
Since 1 Oct 2024, a share buy-back is taxed in the shareholder's hands (like a dividend) — so the old buyback tax-arbitrage is gone. Here's how to compare returning cash now.
What changed
Earlier the company paid buyback tax and the shareholder received the amount tax-free. From 1 Oct 2024, the buyback amount is taxable as a deemed dividend in the shareholder's hands, and the cost of the bought-back shares becomes a capital loss.
Planning now
- For a high-cost or loss shareholder, buyback can still help — the capital loss offsets other gains.
- Otherwise dividend vs buyback is broadly tax-neutral — decide on commercial grounds (control, EPS, cash).
Who it helps
Company promoters and shareholders deciding how to return cash.
Deciding today
- Run the numbers for each shareholder — a promoter with a high cost base may prefer buyback (for the capital loss), a low-cost holder is indifferent.
- Since both are now taxed in the shareholder's hands, choose on commercial grounds: control, EPS, surplus cash.
The law behind it
Section 69 (buyback) Income-tax Act 2025
General information for FY 2025-26 (AY 2026-27), not advice on your specific case. Limits, rates and conditions
change with each Finance Act and depend on your facts — confirm before acting. © EaseValue Advisors LLP.
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