Bajaj Auto’s ₹5,632.8-crore share buyback, which opened on July 1, comes with a significant change for investors. Shares accepted in the buyback will now be taxed under the new regime that took effect on April 1, 2026, replacing the deemed dividend framework that applied until March 31, 2026.
The company is buying back up to 46.94 lakh fully paid-up equity shares at ₹12,000 apiece through the tender offer route, with the offer remaining open until July 7. While the buyback price offers a premium over the prevailing market price, investors should also understand the new tax rules, as they will determine how the buyback proceeds are taxed.
How buyback taxation has changed
A share buyback is when a company repurchases its own shares from existing shareholders, usually to return surplus cash, improve earnings per share or optimise its capital structure. However, the tax treatment of buybacks has changed significantly over the past two years.
According to CA Chandni Anandan, Tax Expert at ClearTax, the first thing investors should check is when the buyback took place, as the applicable tax rules vary across different periods.
“For buybacks completed on or before September 30, 2024, the company generally paid buyback tax under the old regime, and shareholders usually did not pay tax on the buyback proceeds,” she said.
The framework changed from October 1, 2024, when the tax burden shifted from companies to shareholders.
“For buybacks from October 1, 2024 onwards, the amount received by the shareholder is taxed as deemed dividend income, and the company no longer bears the buyback tax. This makes the tax burden shift from the company to the shareholder, which is a major change in how buybacks are treated,” Anandan said.
However, that regime applied only until March 31, 2026.
“With effect from April 1, 2026, buyback transactions will be taxed as capital gains in the hands of shareholders. While non-promoters will generally face tax rates aligned with capital gains, promoters may attract additional tax exposure. These changes do not apply to transactions made up to March 31, 2026,” she added.
What changes for Bajaj Auto shareholders?
Since Bajaj Auto’s buyback opened after April 1, 2026, shareholders whose shares are accepted under the offer will be taxed under the capital gains regime.
This differs from the deemed framework that applied to listed company buybacks between October 1, 2024 and March 31, 2026. The applicable tax treatment will depend on the shareholder’s facts and circumstances, including the nature of the gains and the relevant provisions of the Income-tax Act.
Who is responsible for paying and reporting the tax?
Under the current framework, the responsibility for reporting the transaction and paying tax rests with the shareholder.
“Under the current rules, the shareholder is responsible for paying tax on the buyback amount received, subject to the applicable residential status and tax provisions. In many cases, the amount is reported under ‘Income from Other Sources’, while the shareholder may also need to consider the tax impact on the shares themselves depending on the facts of the transaction,” Anandan said.
She advised investors to retain the buyback offer letter, broker communication, payment advice and other supporting documents so the transaction can be correctly reported while filing their Income Tax Return (ITR) and explained, if required, at a later stage.
Acceptance ratio will also determine the final payout
Apart from taxation, investors should remember that tendering shares does not guarantee all of them will be accepted.
Bajaj Auto plans to repurchase up to 46.94 lakh equity shares through the tender offer route. The final acceptance ratio will depend on the total number of shares tendered by eligible shareholders relative to the number of shares the company intends to buy back.
Shares that are not accepted will remain in the investor’s and can continue to be held or sold on the stock exchange.