New Delhi: In a shift to protect minority shareholders and curb tax arbitrage by promoters, Finance Minister Nirmala Sitharaman on Sunday proposed a major overhaul of the taxation framework governing share acquirebacks. Presenting the Union Budobtain 2026-27, Sitharaman stated that acquirebacks will be taxed as capital gains for all categories of shareholders.
To discourage misapply of tax arbitrage, promoters will be subject to an additional acquireback tax, raising the effective tax rate to 22 per cent for corporate promoters and 30 per cent for non-corporate promoters, she stated. Sitharaman stated, “Change in taxation of acquireback was brought in to address the improper apply of acquireback route by promoters.” Market experts believe that the higher tax burden on promoters may lead companies to reassess their capital allocation strategies between dividconcludes and acquirebacks.
RoopBhootra, Whole-time Director, Anand Rathi Share and Stock Brokers, stated:“The proposed shift is a positive for individual shareholders as tax liability reduces from 30 per cent (highest slab rate) to capital gains rates (short term 20 per cent and long-term 12.5 per cent) and negative for corporates and discourages acquireback and pushes corporates to apply reserves for capital expconcludeiture and/or R&D.”
“Revamp of acquireback tax framework, and the rise in STT (Securities Transaction tax)on futures and options will influence investor behaviour and short-term sentiments,” ParizadSirwalla, Partner and Head, Global Mobility Services- Tax, KPMG in India, stated.
In market parlance, acquireback tax is a kind of tax levied on companies that acquireback their own shares from shareholders. Generally, governments impose this tax to restrain firms from distributing profits to shareholders through share acquirebacks rather than paying dividconcludes.
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