Infosys Launches Massive ₹18,000 Crore Share Buyback
Indian IT giant Infosys has set the markets buzzing with its announcement of a substantial share buyback program worth ₹18,000 crore. The company has fixed the buyback price at ₹1,800 per share, representing a significant 15% premium over the current market price of approximately ₹1,575. This attractive premium has naturally caught the attention of investors, with the offer remaining open until November 26, 2025.
New Tax Rules Transform Buyback Landscape
The Infosys buyback comes with an important twist that every investor must understand. Effective April 1, 2024, income tax regulations governing share buybacks have undergone a fundamental change. According to Mumbai-based tax and investment expert Balwant Jain, the previous tax structure has been completely overhauled.
"Before April 1, 2024, companies were liable to pay 20% tax on the amount used for share buybacks, while shareholders enjoyed tax-free proceeds under Section 10 of the Income Tax Act," Jain explained. "However, under the new regime, money received by shareholders through buybacks is now treated as deemed dividend income and taxed according to the individual's income tax slab."
This paradigm shift means that Infosys shareholders participating in the current buyback will see their entire proceeds taxed as dividend income, with no provision for deducting the original acquisition cost of the shares.
Understanding Capital Loss and Tax Implications
Pankaj Mathpal, MD & CEO at Optima Money Managers, clarified how investors can handle the acquisition cost under the new framework. "The original purchase price of Infosys shares will be considered as capital loss for investors," Mathpal stated. "This capital loss can be carried forward for eight financial years, allowing investors to offset it against future capital gains during this period."
Mathpal further elaborated on the tax calculation methods: "Under the new income tax regime, buyback income is added to your total annual income and taxed according to your applicable slab rate. However, under the old tax regime, if you've held the shares for more than one year, long-term capital gains tax of 10% would apply. For holdings less than one year, the tax rate would be 12.50%."
Who Should Actually Participate in the Buyback?
Balwant Jain provided crucial guidance on determining whether participating in the Infosys buyback makes financial sense. "Tendering shares in this buyback becomes tax-efficient only if your total taxable income, including the buyback dividend, remains below the threshold for Section 87A rebate under the new tax regime," he advised.
Explaining the Section 87A rebate in detail, Jain noted: "For FY26, non-salaried individuals with income up to ₹12 lakh are not expected to pay any income tax. Salaried individuals benefit from a standard deduction of ₹75,000 under Section 87A, effectively raising their threshold to ₹12.75 lakh."
Investors are strongly recommended to calculate their total projected income for FY26, including the buyback proceeds, before deciding to participate. If the combined amount stays within the applicable threshold limits, tendering shares could be a financially prudent move.
Key Takeaways for Infosys Shareholders
The Infosys buyback presents both opportunity and complexity. Shareholders must carefully assess their individual tax situations before participating. The new tax rules have fundamentally altered the attractiveness of buyback offers, making them beneficial primarily for investors in lower tax brackets.
The capital loss from the original share acquisition can provide future tax benefits, but the immediate tax liability on the buyback proceeds requires careful planning. With the offer remaining open until November 2025, investors have sufficient time to consult with tax experts and make informed decisions.
Disclaimer: This analysis is for educational purposes only. The views expressed belong to individual analysts and experts. Investors should consult certified professionals before making any investment decisions.
