India, Feb. 1 -- The Income Tax Department has issued a clarification on how "buyback tax" has changed with Union Budget 2026, to the benefit of small shareholders.

"On the whole, the buyback taxation has been simplified with benefits to small shareholders," the taxman wrote on X, formerly Twitter. For promoters, the tax liability will largely remain similar.

A buyback was presently taxed as dividend but extinguishment of share was treated as capital loss. This posed problems to small shareholders who had no capital gains to set off the loss. Also, buyback conceptually is in nature of capital gains.

Therefore, in Finance Bill 2026, buyback treatment is changed to capital gains.

Shareholders other than promoters will pay tax on such ga...