Capital gains on share buyback get new surcharge twist; income tax dept explains what it means for you

On March 26, 2026, the Income Tax Department clarified that one of the changes made through the government’s amendments to the Finance Bill, 2026 introduces a surcharge on the additional income-tax that promoters have to pay on capital gains arising from buyback, in accordance with Section 68 of the Companies Act, 2013. The surcharge is set at 12%.

The Income Tax Department said on X (formerly Twitter): “It is clarified that Section 69 of the Income-tax Act, 2025 provides for tax rates only in respect of additional income tax on promoters in respect of capital gains on such buyback. Therefore, the rate of 12% will apply only on additional income-tax to be paid by the promoters on aforesaid capital gains mentioned in Section 69(2)(b).”

What does this mean for individuals who are not promoters of a listed company?

This means that for individuals who are non-promoters, surcharge as per normal provisions will apply, if applicable on such capital gains.

According to Chartered Accountant (Dr.) Suresh Surana, the proposed amendments to the Finance Bill, 2026 indicate a move towards a uniform surcharge of 12% on capital gains of promoters arising from share buy-backs, specifically in cases covered under Section 69 of the Income-tax Act, 2025, that is share buy-back transactions undertaken by companies in accordance with Section 68 of the Companies Act, 2013.

Surana says that while the applicability of 12% surcharge provision refers wholly to Section 69 (which may be interpreted to apply broadly to capital gains arising from buy-back transactions), the Income Tax Department has issued a clarification through its official Twitter communication stating that the 12% surcharge will apply only in respect of Section 69(2)(b), i.e., the additional income-tax payable by promoters.

Accordingly, the rate of 12% would apply only to such additional income-tax payable by promoters on the specified capital gains. In the case of non-promoter shareholders, however, surcharge shall continue to be governed by the normal applicable provisions, depending on the overall income profile.

How does this impact?

Based on the clarification issued on X, the 12% surcharge would be applicable only on the additional income-tax payable by promoters in respect of such transactions.

The introduction of a uniform surcharge of 12% on capital gains alters the earlier income-based surcharge structure, thereby impacting promoters differently depending on their income levels. The applicable surcharge rates are as follows:

Total Income (In Rs)	Old Tax Regime	New Tax Regime
Rs 50 lakh to Rs 1 crore	10%	10%
Rs 1 crore to Rs 2 crore	15%	15%
Rs 2 crore to Rs 5 crore	25%	25%
Above Rs 5 crore	37%	25%

Source: CA (Dr.) Suresh Surana

The shift to a flat 12% surcharge standardises the tax treatment for such buy-back transactions, resulting in a redistributive impact as follows:

	Example 1		Example 2		Example 3
Income Bracket	Below 50 lakh		Between 50 Lakh – 1 crore		Above Rs 1 crore
Assuming Long Term Gains from Buyback	Rs 10 lakh		Rs. 60 lakh		Rs 1.2 crore
	Proposed in Finance Bill, 2026	Amendments proposed in Finance Bill 2026	Proposed in Finance Bill, 2026	Amendments proposed in Finance Bill 2026	Proposed in Finance Bill, 2026	Amendments proposed in Finance Bill 2026
Additional Capital Gains Tax @ 9.5% (Assuming in case of Domestic Company)	95,000	95,000	5,70,000	5,70,000	11,40,000	11,40,000
Surcharge	Nil	11,400	57,000	68,400	1,71,000	1,36,800
Cess @ 4%	3,800	4,256	25,080	25,536	52,440	51,072
Total	98,800	1,10,656	6,52,080	6,63,936	13,63,440	13,27,872
Impact	Increase Tax Burden of Rs 11,856		Increase Tax Burden of Rs 11,856		Tax Savings of Rs 35,568

Source: CA (Dr.) Suresh Surana