Infosys Buyback Worth ₹18,000 Crore: What Higher Tax Means for Shareholders

Infosys’ ₹18,000 Crore Buyback: Why Investors May Face a Heavier Tax Burden

Infosys has announced its largest-ever share buyback worth ₹18,000 crore. India’s second-largest IT services firm will repurchase up to 10 crore shares—around 2.41% of its paid-up capital—at ₹1,800 per share. For context, Infosys closed at ₹1,508.50 on September 15.

At first glance, the offer looks attractive, but shareholders must consider a crucial factor: the new tax rules make buybacks far less rewarding than before.

What Changed in Buyback Taxation?

Until September 2024, companies paid a 20% buyback tax (effectively ~23%), and investors were exempt from paying tax on their gains.

From October 1, 2024, the rules flipped. Now:

The entire buyback amount is treated as dividend income for shareholders under Section 2(22)(f).

This is taxed at the investor’s income-tax slab rate, which can go beyond 30% for high earners.

The company itself no longer pays any buyback tax.

Madhupam Krishna, SEBI-registered adviser at WealthWisher Financial Planner and Advisors, explained:

“The full buyback proceeds are considered as dividend income and taxed at the shareholder’s slab rate, which can be as high as 30%+.”

Example: Buyback vs. Market Sale

Suppose you bought Infosys shares at ₹1,000 and tender them in the buyback at ₹1,800:

Buyback route:

Full ₹1,800 is taxed as income at your slab rate.

Your ₹1,000 purchase price becomes a capital loss, usable only against future capital gains.

TDS applies—10% for residents, 20%+ for NRIs (subject to treaty relief).

Selling in the open market:

Only the ₹800 gain (₹1,800 – ₹1,000) is taxed as capital gains.

Securities Transaction Tax (STT) also applies, but the overall tax outgo is much lighter.

As Srinivasan B., founder of Shree Sidvin Investment Advisors, told Moneycontrol:

“The new rules make buybacks far less efficient. A direct market sale is often more tax-friendly for most investors.”

What This Means for Shareholders

High-tax-bracket investors lose the most since proceeds are fully taxed as income.

Buybacks may no longer be attractive, despite the premium price offered.

Market sales could be smarter, especially if you can manage capital gains more efficiently.

In short, while Infosys’ buyback may look like a golden opportunity on paper, the revised tax rules mean shareholders should weigh their options carefully before tendering shares.