Section 69 — Buyback by Company | ITA 2025

Section 69 — BUYBACK BY COMPANY — CG TREATMENT WITH PROMOTER ADD-ON

Section 69 is the substantive equivalent of 1961 s. 46A. Sub-section (1) — shareholder is taxed under Capital Gains on (consideration received MINUS cost of acquisition) when company buys back its own shares / specified securities. Sub-section (2) (FA 2026 — substituted) — for promoter-shareholders of buybacks under s. 68 of Companies Act, 2013, an ADDITIONAL income-tax applies on top of the regular CG tax — at differential rates for STCG (s. 196) and LTCG (s. 197/198) and split between domestic-company and other-company promoters (Table). Sub-section (3) — promoter definition: SEBI-Buyback-Regulation 2(k) for listed companies; Companies Act 2013 s. 2(69) plus 10%-shareholding test for unlisted.

Statutory text — Income-tax Act, 2025

Marginal note — Capital gains on purchase by company of its own shares or other specified securities

(1) If a shareholder or a holder of other specified securities receives any consideration from any company for the purchase of its own shares or other specified securities held by such shareholder or holder of other specified securi- ties, then, subject to the provisions of section 72, the difference between the cost of acquisition and the value of consideration so received shall be deemed to be the “Capital gains” arising to such shareholder or the holder of other specified securities, as the case may be, in the year in which the company purchases the shares or other specified securities. 10[(2) In respect of capital gains referred to in sub-section (1), where a company pur- chases its own shares or other specified securities in accordance with the provisions of section 68 of the Companies Act, 2013 (18 of 2013) and the shareholder or holder of other specified securities is a promoter, the aggregate income-tax payable on such capital gains shall be—

(a) the income-tax payable on such capital gains in accordance with the pro- visions of this Act; and

(b) an additional income-tax in respect of capital gains specified in column B of the Table below, computed at the rate specified in column C or column D of the said Table:

TABLE — Section 69(2)

Sl. No. (A)	Income (B)	Rate — Domestic Co. Promoter (C)	Rate — Other Promoter (D)
1.	Short-term capital gains referred to in section 196 arising from the transfer of such securities.	2%	10%
2.	Long-term capital gains referred to in section 197 or section 198 arising from the transfer of such securities.	9.5%	17.5%

(3) For the purposes of this section,—

(a) in the case of a company whose shares are listed on a recognised stock exchange in India, ‘promoter’ shall have the same meaning as assigned to it in regulation 2(k) of the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(b) in any other case, “promoter” means,––

(i) a “promoter” as defined in section 2(69) of the Companies Act, 2013 (18 of 2013); or

(ii) a person who holds, directly or indirectly, more than 10% of the shareholding in the company;

10. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to their substitution, sub-sections

(2) and (3) read as under : ‘(2) If the shareholder receives any consideration of the nature referred to in section 2(40)(f), from any company in respect of buy-back of shares, then for the purposes of this section, the value of such consideration shall be deemed to be nil.

(3) For the purposes of this section, “specified securities” shall have the same meaning as assigned to it in Explanation 1 to section 68 of the Companies Act, 2013 (18 of 2013).’

(c) “specified securities” shall have the same meaning as assigned to it in

Explanation 1 to section 68 of the Companies Act, 2013 (18 of 2013).]

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 69	INCOME-TAX ACT, 1961 — s. 46A
s. 69(1) — main CG on buyback	1961 s. 46A read with FA 2024 onwards
s. 69(2) — Promoter add-on tax (FA 2026 substituted)	Successor to s. 115QA (now repealed) / 1961 s. 46A current scheme
Specified securities — Companies Act 2013 s. 68 Expl. 1	1961 s. 46A — same
Promoter — SEBI 2018 Reg / CA 2013 s. 2(69) + 10% test	Same

HISTORICAL CONTEXT — BUYBACK TAX REGIME EVOLUTION

Pre-FA 2024, listed-company buyback was taxed at company level under 1961 s. 115QA at 23.296% (effective) — shareholder receipt was exempt u/s 1961 s. 10(34A). FA 2024 (effective 1-Oct-2024) abolished s. 115QA and shifted incidence to the SHAREHOLDER (treating buyback as deemed-dividend until FA 2025 reverted it to capital-gains). FA 2026 (substituted s. 69(2) and (3)) refines the regime: regular CG-tax PLUS additional promoter-specific tax — to discourage promoter-led buybacks as tax-arbitrage from dividend distribution. Sub-section (3) ensures wide capture of 'promoter' — listed (SEBI) and unlisted (CA + 10% threshold).

STATUTORY ARCHITECTURE

Sub-section (1) — main CG charge: difference between consideration and cost-of-acquisition is CG, in year of buyback. Sub-section (2) — promoter add-on: STCG (held ≤ 12/24/36 months per s. 196) — 2% / 10% (domestic / other promoter); LTCG (s. 197 / 198) — 9.5% / 17.5%. Total tax incidence on promoter = base CG-rate + add-on rate. Sub-section (3) — definitions: (a) listed: SEBI Buyback Regulation 2(k); (b) unlisted: CA-2013 s. 2(69) + 10% direct/indirect shareholding test.

CASE LAW

Cognizant Technology Solutions (Mad HC) — pre-FA 2024 era buyback taxed at company level under s. 115QA; SC stayed; subsequently moot post FA 2024 amendment.

PLANNING NOTES

(i) For listed-company buybacks involving promoter participation, the promoter's effective tax cost can exceed dividend-route — model the differential carefully. (ii) For unlisted-company buybacks, evaluate the 10%-shareholding-promoter test — minor shareholdings may avoid promoter add-on. (iii) Promoter-classification timing — date of buyback offer / acceptance; document SEBI / Registrar filings for tax-position support. (iv) Foreign-promoter (non-resident) — base CG-rate at 12.5% LTCG / treaty rate; add-on at 17.5% LTCG (other-promoter rate); aggregate ≈ 30%. Compare against treaty-based dividend WHT rates.

CROSS-REFERENCES

Section 67 / 68 — Capital Gains framework.
Section 196 — STCG rate.
Section 197 / 198 — LTCG rates.
Section 2(40) — Dividend definition (interaction).
SEBI Buyback Regulations, 2018.
Companies Act, 2013 — s. 68 (buyback) and s. 2(69) (promoter).

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