Section 46A → Section 69

Buy-back of shares — back to capital gains, extra tax for promoters (Finance Act 2026)

Section 46A of the old Income-tax Act, 1961 · new section 69 under the Income-tax Act, 2025

New reference Section 69 (and section 2(40))

Income-tax Act, 1961Section 46A

Up to 30 Sept 2024: company paid 20% buy-back tax (115QA); shareholders exempt (10(34A))
1 Oct 2024 to 31 March 2026: entire buy-back amount taxed as dividend (2(22)(f)) at slab rates
Cost of shares allowed as a capital loss under 46A
TDS at 10% on the dividend for residents

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 69 (and section 2(40))

Finance Act 2026 omitted the dividend clause (2(40)(f)) and rewrote section 69 from 1 April 2026
Shareholder taxed on capital gains: consideration minus cost of acquisition
Promoters pay additional income-tax: domestic company promoter 2% (STCG) / 9.5% (LTCG); other promoters 10% / 17.5%
'Promoter' for unlisted companies includes anyone holding more than 10% directly or indirectly

Applies from tax year 2026-27 (from 1 April 2026).

What changed

A real change. The 2024 'buy-back as dividend' regime lasted only till 31 March 2026. Buy-backs from 1 April 2026 are capital gains again, with a promoter surcharge-style additional tax.

Practice notes

Buy-backs between 1 October 2024 and 31 March 2026 stay under the dividend regime of the 1961 Act — including the capital loss for cost.
Effective promoter rate on LTCG: 12.5% + 9.5% = 22% (domestic company) or 12.5% + 17.5% = 30% (others), before surcharge and cess.
Check TDS under section 393 on buy-back consideration for tax year 2026-27.

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

How is buy-back of shares taxed under the new Income Tax Act?

From 1 April 2026 it is capital gains under section 69 of the Income-tax Act, 2025, not dividend. Promoters pay additional tax: 2%/9.5% (domestic company) or 10%/17.5% (others) on STCG/LTCG.

Is buy-back still treated as dividend?

No. Finance Act 2026 omitted section 2(40)(f). The dividend treatment applied only to buy-backs from 1 October 2024 to 31 March 2026.

What is section 46A called in the new Income Tax Act?

Section 69 of the Income-tax Act, 2025.

What changed in section 46A under the new Income Tax Act?

A real change. The 2024 'buy-back as dividend' regime lasted only till 31 March 2026. Buy-backs from 1 April 2026 are capital gains again, with a promoter surcharge-style additional tax.

Is section 46A still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 46A of the 1961 Act. Section 69 of the 2025 Act applies from tax year 2026-27.

Related sections

2(22)→2(40)Definition of dividend — deemed dividend 2(22)(e) and buy-back clause removed 112A→198Tax on long-term capital gains from listed equity shares, equity mutual funds and business trust units (STT paid)111A→196Tax on short-term capital gains from listed equity shares, equity mutual funds and business trust units (STT paid)46–55A→68–91Liquidation, buy-back, cost by mode of acquisition, depreciable assets 50, MLD 50AA, unquoted shares 50CA, advance money 51, 54D–54H, valuation officer