Infosys share buyback: Infosys shares have been on an uptrend after the announcement of a share buyback worth ₹18,000 crore. The Infosys buyback price has been fixed at ₹1,800 apiece, which is around 15% higher than the current share price of ₹1,575. As the Infosys share buyback offer ends on November 26, 2025, a significant number of Infosys shareholders are expected to be attracted to this lucrative-looking tender offer.
However, there is a twist to this offer, following the income tax rule change that took effect on 1 April 2024.
Infosys buyback: Income tax compliance
Speaking on the new income tax rule applicable to the buyback of shares, Mumbai-based tax and investment expert Balwant Jain said, “Before 1 April 2024, companies were required to pay 20% tax on the amount utilised for share buybacks, while the net proceeds received by shareholders were exempt under Section 10 of the Income Tax Act. However, on or after 1 April 2024, the money received by a shareholder from a company under a share buyback is treated as a deemed dividend, taxable at the individual’s slab rate.”
Jain stated that if an Infosys shareholder tendering their stock in the current buyback offer receives the entire amount, it will be taxable as dividend income in the hands of the shareholder, with no deduction allowed for the cost of acquisition of the shares.
Commenting on the treatment of the cost of stock acquisition that the investor paid at the time of buying Infy shares, Pankaj Mathpal, MD & CEO at Optima Money Managers, said, “The cost of acquisition will be considered as investors’ capital loss that will carry forward for the next eight financial years. This means the investor will be able to adjust this capital loss with their capital gains in the next eight financial years.”
Income tax rate applied to the buyback of shares
In the new income tax regime, one’s income from the buyback is added to one’s entire income in the financial year and income tax rate is levied as per the taxpayer’s income tax slab, explained Mathpal.
“However, under the old tax regime, if the buyback income is received after one or more years of acquisition, then a long-term capital gain will be applied, and a 12.5% tax will be levied on the buyback beneficiary. If the buyback income has come before the completion of one year of the stock acquisition, then 20% tax will be levied on the beneficiary of the buyback offer,” he added.
Infosys share buyback: Who should participate?
Tendering shares in a buyback is tax-efficient only if your total taxable income (including the dividend from the buyback) does not exceed the threshold for the Section 87A rebate under the new tax regime, opined Jain. “In that case, you can claim a rebate for the entire tax payable on the dividend.”
Explaining the 87A rebate applicable for Infosys buyback offer, Jain said, “In the new income tax regime, a non-salaried individual earning up to ₹12 lakh in FY26 is expected to pay any income tax. For a salaried individual with earnings, there is a standard deduction of ₹75,000 under Section 87A. Therefore, for a salaried individual with earnings, the threshold becomes ₹12.75 lakh. Therefore, an Infosys shareholder planning to participate in the Infosys buyback offer is advised to add the buyback income to their total income for FY26. If the outcome is within the threshold limit of ₹12 lakh for non-salaried and ₹12.75 lakh for salaried earning individuals, then one can tender one’s Infy share.”
Key Takeaways
- Shareholders must calculate their total taxable income to determine the tax implications of the buyback.
- The new tax rules classify buyback proceeds as dividend income, altering the tax treatment significantly.
- Investors can carry forward capital losses from the acquisition of shares to offset future gains.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
