What Investors Should Know About the Infosys Buyback and Its Tax Rules
About the Infosys Buyback Announcement
Infosys has announced a fresh share buyback programme, and investor interest has sharply increased because the buyback price is significantly higher than the prevailing market price. However, the taxation mechanism for buybacks changed after the Finance Act 2023, and this shift completely alters whether the buyback is financially attractive for retail investors.
The screenshot highlights key points shared by the CEO of a leading brokerage regarding eligibility, record date, buyback price, and taxation rules. Below is a structured, complete, and simplified explanation suitable for investors analysing whether they should participate.
To be eligible for the Infosys buyback, investors must hold shares by 14 November. Anyone buying on or after the ex-date loses eligibility.
Infosys will repurchase shares at ₹1,800 per share, whereas the prevailing market price is around ₹1,550. The apparent difference of ~₹250 per share looks lucrative — but the taxation system completely changes the final outcome.
Understanding the Taxation of the Buyback
After the law change, companies no longer pay buyback tax. Instead, investors pay tax directly under “Income from Other Sources.” This removes the earlier tax-free advantage of participating in buybacks.
Buyback proceeds are fully taxed as Income from Other Sources at your individual slab rate. This means the buyback amount is treated like any other regular income — not like capital gains.
This is the most important shift because most retail investors fall in the 20–30% tax bracket. So, whatever gain you make from the difference between the market price and the buyback price largely gets eroded.
Your Investment Becomes a Capital Loss
Because the buyback receipt itself is taxed separately, the cost of acquisition of your shares is compared with the "zero consideration" method for capital gains — meaning your entire purchase value becomes a capital loss.
If shares were held for less than 1 year → Short-Term Capital Loss (STCL)
If shares were held for more than 1 year → Long-Term Capital Loss (LTCL)
This capital loss can be set off only against other capital gains — not against buyback income. Therefore, the buyback is beneficial only if you have capital gains elsewhere that can be adjusted.
The buyback is attractive only if you already have capital gains from equity, debt, property, or other taxable assets that you need to offset using capital losses.
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Detailed Analysis: Should You Participate in the Infosys Buyback?
Many retail investors assume a buyback is always profitable because the offer price is higher. However, buybacks have lost their old tax-free advantage. Now the key determinant is not the premium — it is your tax slab and available capital gains.
For someone in the 30% slab, the tax taken away is around ₹75 per ₹250 potential gain. After adjusting for capital loss utilisation, the net advantage may shrink drastically.
✔ You pay slab-rate tax on the buyback amount.
✔ You get a capital loss that can be set off only if you have existing gains.
✔ The buyback price premium becomes attractive only if your overall tax position allows optimisation.
Investor Takeaway
The Infosys buyback may look profitable on the surface due to the difference between the market price and buyback price. But after applying the new tax rules, the benefit meaningfully reduces unless you have capital gains that you want to offset. Investors should calculate their tax bracket, gains, and expected net outcome before tendering shares.
For long-term investors without capital gains to offset, simply holding Infosys — instead of tendering — may be more beneficial. Updated stock analysis and ongoing market guidance are always available at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
