Capital gains tax change in Budget 2026: FM says buyback for all shareholders to be taxed as capital gains

Nirmala Sitharaman

• Buyback for all shareholders to be taxed as capital gains in Budget 2026
• STT on futures raised to 0.05 percent from 0.02 percent
• Sensex crashed over 1,500 points and Nifty fell 500 points after announcements

Did our AI summary help?

Finance Minister Nirmala Sitharaman on February 1 proposed to tax buyback for all shareholders as capital gains. She however added that promoters will pay an additional buyback tax.

The finance minister made the proposal while presenting Union Budget 2026. She also raised STT on futures to 0.05 percent from 0.02 percent.

After the announcements, stocks markets crashed. Sensex crashed more than 1,500 points to 80,740.23, while Nifty 50 fell500 points to 24,820.15, as seen at 12.35 pm.

Expert calls buyback taxation change a 'welcome' move:

Amit Gupta, Partner at Saraf and Partners, said buyback taxation was again tweaked back to being characterized as capital gain. "The buyback taxation regime was revamped in past budgets wherein entire amount received through buy-back was to be taxed as dividend for preventing promoter profit extraction and abuse. This recalcitration as capital gains is a welcome change and would pacify the concerns of taxpayers around buy-back route taxation," the expert said.

"The steep increase in STT on futures and options, coming on top of last year’s hike, is likely to raise impact costs for traders, hedgers, and arbitrageurs. This could cool derivative activity and lead to a reduction in volumes. The intent appears to be volume moderation rather than revenue maximisation, as any potential revenue gain could be offset by lower derivative volumes," said Shripal Shah, MD & CEO, Kotak Securities.

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