Finance Bill 2026: 12% Buyback Surcharge Applies Only on Additional Income Tax Payable by Promoters
The clarification seeks to address concerns raised by stakeholders that a flat surcharge could be interpreted as being applicable across the entire income.
The Income TaxDepartment, through a post on X has clarified that the 12% surcharge on buyback of shares, as introduced under the Finance Bill, 2026 shall be applicable only on the additional income tax payable by promoters on capital gains arising from such transactions, and not on the entirety of their...
The Income TaxDepartment, through a post on X has clarified that the 12% surcharge on buyback of shares, as introduced under the Finance Bill, 2026 shall be applicable only on the additional income tax payable by promoters on capital gains arising from such transactions, and not on the entirety of their income.
https://x.com/IncomeTaxIndia/status/2037188564228989172
The clarification comes following certain amendments being effected to the Finance Bill, 2026. One of the revisions introduces a revised taxation framework for buybacks by treating the consideration received by shareholders as capital gains.
It has been specified that the surcharge at the rate of 12% shall be levied only on such additional income tax payable by promoters, in accordance with the buyback provisions under Section 68 of the Companies Act, 2013. It has been further clarified that Section 69 of the impending Income Tax Act, 2025 provides for tax rates applicable to such additional income tax in respect of capital gains arising from buybacks.
Accordingly, the surcharge is restricted to the additional income tax component referred to under Section 69(2)(b), thereby ensuring that it is not applied on the entire capital gains or total income of the promoter.
Shareholders who are not promoters will continue to be governed by the existing surcharge provisions under the tax framework, depending on their applicable income thresholds.
The Revenue has released this clarification to remove ambiguity surrounding the applicability of surcharge under the new buyback regime, particularly due to concerns that a flat surcharge could be interpreted as being applicable across the entire income.
The revised regime, which shall come into effect from April 1, 2026 also marks a shift from the earlier system where buyback proceeds were treated as dividends in the hands of shareholders.
Taxing such receipts as capital gains, coupled with the targeted surcharge on promoters, reflects the Government’s intent to streamline the taxation framework while curbing potential misuse of buyback routes.
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