As the Infosys buyback opens, taxation will be the tricky road

19 Nov 2025 , 04:26 PM

INFOSYS BUYBACK TO OPEN ON 20-NOVEMBER

The Infosys buyback date announcement got prolonged due to delays in getting the approval of SEC. Since the Infosys ADRs are listed on the NYSE, Infosys required the approval of the Securities and Exchange Commission (SEC) for the buyback. However, that got stuck due to the US government shutdown since the start of October 2025. That meant; all non-critical activities were put on hold. Now that the buyback has been approved and the dates announced, here is a quick look at the details of the buyback deal.

Infosys will buy back a total of 10 Crore shares at a price of ₹1,800 per share. This translates into 2.41% of the total equity shares outstanding. Post the buyback, the number of outstanding shares will be extinguished to the extent of bought back shares, and the size of the capital will also reduce. This will help improve the EPS of the company, as well as its capital return ratios. As of 12.55 pm on 19-November, Infosys trades on the NSE at ₹1,535 per share, so the buyback of ₹1,800 is still at a premium of 17.3% to the current market price. The buyback record date has been set at 14-November. The buyback issue opens on 20-November and closes on 26-November.

OLD REGIME OF BUYBACK TAXATION

The old regime of buyback taxation was in existence till the end of September 2024. Since October 2024, there is a new taxation regime, about which we will discuss later. Under the old buyback taxation regime, the transaction of buyback was tax-neutral for the investor. Instead, the entire buyback tax was paid by the company on the difference between the price of issue of such shares and the buyback price. The table below captures how the buyback was taxed in India prior to October 2024, with the case of XYZ Ltd

Particulars	Taxation for Company	Taxation for Individual
Total shares bought back	4,80,00,000 (4.80 crore)	Not Applicable
Price of buyback	₹1,325	Not Applicable
Issue price of these shares	₹850	Not applicable
Price difference for taxation	₹475	Not Applicable
Total Taxable amount	₹2,280 crore	Tax-Free
Rate of tax applied	20% tax + 12% surcharge + 4% cess = 23.296%	Tax-Free
Tax Paid by Company	₹531.15 crore	Tax-Free

In the old regime, applicable up to September 2024, the entire buyback tax was borne by the company and it was tax-free in the hands of the investor. However, there were objections to this taxation methodology, as it favoured the investors who took the buyback and exited the company at the cost of the shareholders who stayed on as owners of the company. As a result, the CBDT changed the taxation of buyback and put the burden of taxation on the individual rather than on the company. This new regime came into effect from October 2024. While it is a fairer approach to taxation, it has certainly dampened the enthusiasm of investors for buybacks. Let us understand why!

NEW REGIME OF BUYBACK TAXATION

Here are some of the highlights of the new regime of buyback taxation effective from October 01, 2025.

• The incidence of buyback taxation will no longer be on the company, but the individual will have to bear the taxation burden on buyback.
• The proceeds of the buyback (entire proceeds) will be treated as dividend (other income) in the year and taxed at the incremental rate of taxation applicable.
• The cost of the acquisition of shares can be shown as a long-term loss (if held for more than 1 year), or as a short-term loss if held for less than 1 year.
• It must be noted that this notional loss cannot be written off against the sale proceeds (other income). It can only be written off against other capital gains.
• Short Term Capital Losses can be written off against LTCG and STCG. However, long term capital losses can only be written off against LTCG.
• If the gains are insufficient in the same year, they can be carried forwards for a period of 8 assessment years during which such losses can be written off on FIFO basis.

The catch here is that other income is taxed at the peak incremental rate, while STCG is taxable at a maximum rate of 20.8%, and LTCG at a maximum rate of 12.5%. This leads to lower tax absorption on costs, but higher taxation imposed on inflows.

GIST OF THE NEW TAX REGIME ON INFOSYS BUYBACK

Let us understand the impact of the new tax regime on the buyback of Infosys, taxable in the hands of the investor. Let us assume two cases. Case 1 refers to an executive earning ₹18.75 lakhs per annum and Case 2 refers to a high-income professional earning ₹1.04 Crore per year. In addition, both have annual interest income of ₹20,000 and ₹40,000 respectively. Both got 200 shares bought back at ₹1,800 per share and both had purchased the stock at ₹1,400 around 14 months back. Here is the outcome.

Particulars	Case 1	Case 2
Salary Income of Individual	₹18,75,000	₹1,04,00,000
Interest Income	₹20,000	₹40,000
Taxation without buyback	₹1,70,560	32,16,642
Buyback Proceeds Received (Y)	₹3,60,000	3,60,000
Taxation including buyback	₹2,54,800	33,45,810
Incremental Taxation (X)	₹84,240	₹1,29,168
Rate of tax on Buyback (X/Y)	23.40%	35.88%

As can be seen from the above table, the impact of the buyback is much higher for the higher income brackets. The incremental tax rate on the buyback has gone up from 23.4% in Case 1 to 35.88% in Case 2 as the person is in the higher income group. The new buyback rules tend to be biased against higher income groups.