Article · 6 min read

Union Budget 2026: The Buyback Blowback For Founders

Siddarth Pai · Inc42 Free Intermediate India

A venture investor's reading of the Budget 2026 change to buyback taxation and what it means for founders, early employees and investors in private startups.

  • Buyback proceeds are taxed as capital gains for shareholders holding less than 10%, replacing the 2024 rule that taxed them as dividends.
  • Shareholders with 10% or more are treated as promoters and pay an effective 22% (companies) or 30% (others).
  • Buybacks become a workable exit for employees holding ESOPs again, while founders and larger investors pay the higher toll.
Open on inc42.com ↗

The question it answers

  1. My startup wants to run a buyback for early employees and angels. How is that taxed from 1 April 2026?

Read with it

  1. The official Indian government primer on structuring ESOPs for startups, a primary source on the rules that most blog posts... startupindia.gov.in Article · Official primer Employee Stock Options for Startups (Startup India) Startup India / DPIIT
  2. Once you have negotiated the pool size, this is the guide that stops the pool from becoming a tax trap for the very employees... Treelife Article · 25 min read ESOP Taxation in India: Complete Guide for Founders and Startups Treelife
  3. A founder-facing walk through the switch from the Income-tax Act, 1961 to the 2025 Act on 1 April 2026: the single tax year,... Treelife Article · 15 min read The Income Tax Act, 2025 Is Live: Here's What You Actually Need to Know Treelife
eChai Partner Brands The partnership →