India, Feb. 1 -- Finance minister Nirmala Sitharaman announced a major overhaul of the tax treatment of share buybacks today, marking a shift in how India taxes capital returns. The changes are aimed at curbing tax arbitrage while protecting minority shareholders.

Under the new regime, the effective tax rate on share buyback gains will be 22% for promoters which are domestic companies and 30% for promoters which are not domestic companies.

The announcement was one of the most consequential capital market reforms in the Union Budget 2026-27, with implications for listed companies, promoters, retail investors and future capital allocation strategies.

"Under the earlier framework, a shareholder who bought a share at INR 500 and tendered i...