Chapter IV - Computation of Total Income
Section 69
Section 69: capital gains on purchase by a company of its own shares or specified securities
Section 69 governs how a shareholder or holder of other specified securities is taxed when a company buys back its own shares or securities. The basic rule taxes the difference between the buyback consideration and the cost of acquisition as capital gains, but the section also layers on an additional income-tax specifically on promoters' capital gains from Companies Act buybacks, at rates that vary by gain category and whether the promoter is a domestic company.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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 securities, 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.
(2) In respect of capital gains referred to in sub-section (1), where a company purchases 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 provisions 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: Short-term capital gains referred to in section 196 arising from the transfer of such securities—2% where the promoter is a domestic company, 10% where the promoter is other than a domestic company; long-term capital gains referred to in section 197 or section 198 arising from the transfer of such securities—9.5% where the promoter is a domestic company, 17.5% where the promoter is other than a domestic company.
(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; (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).
Introduction
A company buy-back can create a capital-gains result for the seller. Finance Act, 2026 added an additional-tax layer for a promoter in specified Companies Act Section 68 buy-backs.
Key takeaways
Buy-back consideration
A shareholder’s or specified-security holder’s capital gain on a company purchase of its own securities is based on consideration received less acquisition cost, subject to Section 72.
2026 promoter rule
The Finance Act, 2026 adds a further income-tax component for a promoter’s qualifying buy-back gain; the applicable rate depends on gain type and whether the promoter is a domestic company.
The basic buyback taxation rule
Section 69(1) provides that where a shareholder or holder of other specified securities receives consideration from a company for the purchase of its own shares or specified securities, the difference between the cost of acquisition and the consideration received is deemed to be "capital gains" arising to that shareholder/holder in the year the company purchases the shares or securities, subject to Section 72.
Additional tax on promoter capital gains from a buyback
Section 69(2) applies where a company buys back its own shares or specified securities under Section 68 of the Companies Act, 2013, and the shareholder or holder is a "promoter." In that case, the aggregate income-tax payable on the resulting capital gains is the ordinary tax payable under the Act, plus an additional income-tax at the rates below:
| Type of gain | Promoter is a domestic company | Promoter is other than a domestic company |
|---|---|---|
| Short-term capital gains (as referred to in Section 196) from transfer of such securities | 2% | 10% |
| Long-term capital gains (as referred to in Section 197 or Section 198) from transfer of such securities | 9.5% | 17.5% |
Who counts as a "promoter"
Section 69(3) defines "promoter": for a company listed on a recognised stock exchange in India, it takes the meaning from Regulation 2(k) of the SEBI (Buy-Back of Securities) Regulations, 2018; in any other case, it means a "promoter" as defined in Section 2(69) of the Companies Act, 2013, or a person who directly or indirectly holds more than 10% of the company's shareholding.
"Specified securities" has the same meaning as assigned in Explanation 1 to Section 68 of the Companies Act, 2013.
Step-by-step flow for applying Section 69
- 1
Did a company purchase its own shares or other specified securities from the holder?
- No: Section 69 does not apply; use the ordinary capital-gains provisions.
- Yes: Go to the next step.
- 2
Compute the capital gain under Section 69(1)
The difference between the consideration received from the company and the cost of acquisition is deemed to be capital gains of the year in which the company purchases the shares or securities, subject to Section 72.
- 3
Was the purchase made under section 68 of the Companies Act, 2013 and is the holder a promoter?
For a listed company, 'promoter' follows regulation 2(k) of the SEBI (Buy-Back of Securities) Regulations, 2018. In any other case it means a promoter under section 2(69) of the Companies Act, 2013 or a person holding, directly or indirectly, more than 10% of the shareholding.
- No: Only the ordinary income-tax on the capital gain is payable.
- Yes: Go to the next step.
- 4
Add the additional income-tax from the Section 69(2) Table
Short-term capital gains referred to in Section 196: 2% (domestic company promoter) or 10% (other promoter). Long-term capital gains referred to in Section 197 or 198: 9.5% (domestic company promoter) or 17.5% (other promoter). This is in addition to the ordinary income-tax on the gain.
Practical checklist
Do
- Keep purchase consideration, acquisition cost and buy-back date for the shareholder's gain calculation.
- Check whether the holder is a promoter and whether the company's transaction falls under the specified Companies Act route.
- If so, compute the additional-tax table separately from ordinary capital-gains tax.
Avoid
- Do not apply the promoter additional tax to every buy-back holder.
- Do not overlook the Finance Act, 2026 amendment when using an older guide.
Illustrative example
Worked example: a 12% shareholder in an unlisted company buy-back
Hypothetical facts (illustration only, not a real taxpayer): Mr. Mehta, an individual, holds 12% of the shares of an unlisted company. The company buys back part of his shares under section 68 of the Companies Act, 2013 for ₹25,00,000. His cost of acquisition of those shares is ₹10,00,000. Assume the gain is a long-term capital gain referred to in Section 197 or 198.
Capital gain under Section 69(1)
₹25,00,000 consideration − ₹10,00,000 cost = ₹15,00,000, deemed capital gains of the year in which the company purchases the shares (subject to Section 72).
Is he a promoter?
The company is not listed, so Section 69(3)(b) applies. He holds more than 10% of the shareholding, so he is a 'promoter' for this section.
Additional income-tax
He is not a domestic company and the gain is long-term, so column D applies: 17.5% × ₹15,00,000 = ₹2,62,500.
Aggregate tax
Aggregate income-tax on this gain = ordinary income-tax on ₹15,00,000 under the other provisions of the Act + ₹2,62,500 additional income-tax.
Outcome
- Had Mr. Mehta held only 5% and not been a promoter under section 2(69) of the Companies Act, 2013, only the ordinary tax on the ₹15,00,000 gain would apply.
- The ordinary income-tax portion is computed under the other provisions of the Act and is not worked out here.
Glossary
- Buy-back
- A company's purchase of its own shares or specified securities from a holder.
- Promoter
- A holder category for whom the amended Section 69(2) can impose additional income-tax.
Frequently asked questions
How is a shareholder taxed on a company share buyback?
The difference between the buyback consideration received and the cost of acquisition of the shares is treated as capital gains in the year of the buyback, under Section 69(1).
What is the additional tax rate on promoter capital gains from a Companies Act buyback?
For short-term capital gains, 2% if the promoter is a domestic company or 10% otherwise; for long-term capital gains, 9.5% if the promoter is a domestic company or 17.5% otherwise, as set out in the Section 69(2) table.
Does the additional tax under Section 69(2) apply to every shareholder in a buyback?
No - it applies only where the shareholder or holder of specified securities is a "promoter" as defined in Section 69(3).
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Get expert help on share buyback tax treatmentLast updated 10 October 2026