Infosys share buyback: How will your gains be taxed under Income Tax rules

While you will have to report the entire buyback compensation under 'Income from Other Sources', you can declare a capital loss (notional) equal to the buyback amount in Schedule CG as per the IT Act provisions. IT services company Infosys on Thursday, September 11, announced its largest-ever share buyback programme worth ₹18,000 crore. The company will buy 10 crore fully paid-up equity shares of face value ₹5 each at ₹1,800 per share. “The Board of Directors of the Company at their meeting held on September 11, 2025, has considered and approved a proposal to buy back equity shares for an amount of ₹18,000 crore at a price of ₹1,800 per equity share,” Infosys said in an exchange filing. The buyback represents up to 2.41% of the total paid-up equity share capital, and the ₹1,800 price gives a premium of around 19% over Thursday’s closing price on the BSE. As of June 30, 2025, the company had a free cash flow of around ₹7,805 crore ($884 million). Infosys will now seek shareholders’ approval in order to go ahead with the buyback. The important question for investors is, how will the gains be taxed? Tax on buyback gains The gains made through a buyback are taxed as ‘Income from Other Sources’. Until September 30, 2024, whenever a domestic company bought back its own shares, it used to pay additional tax under Section 115QA on the income distributed. For example, if you bought the shares at ₹100 and the company bought them back at ₹400, the company paid the tax on the ₹100 gain you made. However, this changed under the Finance (No. 2) Act, 2024. Starting from October 1, 2024, the entire compensation received by the shareholder is now treated as a deemed dividend under Section 2(22)(f) of the Income Tax Act. This gain is taxed under the head “Income from Other Sources”, according to their tax slab. “Until September 30, 2024, when a domestic company bought back its own shares, it was required to pay additional tax under Section 115QA on the income distributed. In that case, the amount received by the shareholder was exempt under Section 10(34A), and the shareholder had no further tax liability. The Finance (No. 2) Act, 2024, changed this approach. Effective from 01-10-2024, the entire consideration received by shareholders on the buy-back of shares by a domestic company will be taxed in the hands of the shareholders as a dividend under Section 2(22)(f). Hence, the amount received by Mr. X shall be taxable under the head Income from Other Sources,” says Taxmann in response to a Q\&A. Further, the domestic company deducts a tax at source (TDS) at 10% for resident shareholders under Section 194. For non-residents, TDS applies as per Section 195 at the specified rates. This means that when you file ITR, you calculate tax on the buyback as per your slab and adjust it with the TDS already deducted by claiming credit. Importantly, you can declare a capital loss (notional) equal to the buyback amount in Schedule CG. This loss can only be set off against other capital gains and carried forward as per the IT Act provisions. What is buyback? A share buyback happens when a company buys back its own shares from existing shareholders, usually at a price higher than the current market price. This is done for many reasons, including improving financial ratios, increasing shareholder confidence, reducing the number of shares in circulation and sharing surplus.