Buyback Tax

Also called Share Buyback and Buyback

How India taxes the money a company pays when it buys back its own shares. From 1 April 2026 the amount is taxed as capital gains in the hands of the shareholder who sells, and promoters pay an additional tax on top.

Why it matters

Buybacks are one of the ways a startup gives early employees and investors cash before an exit. Treating the payout as capital gains means a holder of unlisted shares for more than 24 months pays 12.5 percent on the gain, so the route a liquidity programme takes decides what people keep.

For example

A startup buys back shares from employees who have held them for three years; each pays 12.5 percent tax on the gain, while a promoter selling in the same buyback pays a higher effective rate.

Go deeper

Budget 2026: I-T Dept explains why share buybacks will now be taxed as capital gains Business Today · article A Budget-day report on the move of buyback proceeds from dividend treatment to capital gains, with the rates for ordinary shareholders and the higher effective rates for promoters. Open businesstoday.in →

Related terms

Also in Starting Up

See how founders actually handle this on Money, pricing and metrics, part of the Starting Up hub.

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