Introduction

Deciding whether to tender your shares into a buyback offer or sell them on the open market used to hinge almost entirely on tax treatment. As of the current rules effective 1 April 2026, that's no longer true — both routes are taxed identically as capital gains. The decision now comes down almost entirely to price, and this calculator compares the two routes exactly as the current rules require.

Complete Guide: Three Tax Regimes Since 2024

Buyback taxation in India has changed three times in under two years, and knowing which regime applies to your specific transaction matters enormously. Before 1 October 2024, the company itself paid a buyback distribution tax at an effective rate of roughly 23.3% under Section 115QA, and shareholders received their proceeds completely tax-free.

From 1 October 2024 to 31 March 2026, that company-level tax was abolished, and the entire buyback consideration became taxable in the shareholder's hands as a deemed dividend at their slab rate — with no deduction allowed for the cost of acquisition, though that cost could be claimed separately as a capital loss carried forward for up to eight years.

From 1 April 2026 onward — the regime currently in effect — the Finance Act 2026 restored capital gains treatment. Shareholders now pay tax only on the actual gain (buyback price minus cost of acquisition), at 12.5% LTCG for holdings beyond 12 months (with an annual exemption of up to ₹1.25 lakh on listed equity gains) or 20% STCG for shorter holdings. Promoters face an additional differential levy, pushing their effective rate to roughly 30% for individuals or 22% for corporate promoters. SEBI has also proposed reintroducing the open market buyback route from 1 August 2026, alongside the existing tender offer mechanism.

How to Use This Calculator

The Comparison Formula

Common Mistakes to Avoid

• Applying the old deemed-dividend logic to a current buyback. That regime ended 31 March 2026 — using it today will significantly overstate your tax liability.
• Forgetting the acceptance ratio. In oversubscribed tender offers, not all tendered shares may be accepted — the untendered portion remains yours, subject to separate tax treatment if later sold.
• Ignoring that both routes are now taxed the same way. Since tax treatment is now identical, comparing purely on price (buyback premium vs current market price) is the correct approach.
• Missing the promoter surcharge. If you're classified as a promoter, your effective rate is meaningfully higher than the standard 12.5%/20% rates.

Worked Example

Example — Tender Route. 100 shares bought at ₹200, tendered into a buyback at ₹500, held over 12 months. Gain = ₹30,000. With the full ₹1.25 lakh exemption available, this falls entirely within the exemption — zero tax, net proceeds of ₹50,000.

Example — Open Market Sell, Same Shares. If instead sold on the open market at ₹420 (below the buyback premium), gain = ₹22,000 — also fully exempt, but net proceeds of only ₹42,000, meaningfully less than the tender route purely because of the lower price, not different tax treatment.

Conclusion

The tender-versus-sell decision has genuinely simplified since April 2026 — with identical tax treatment on both sides, the choice now comes down to which route offers the better price, adjusted for the risk that not all tendered shares get accepted in an oversubscribed offer. Running your specific numbers through this calculator, rather than relying on outdated deemed-dividend assumptions, gives you the comparison that actually matters under today's rules.

FAQs