- Tax on buyback proceeds is treated as income from other sources, taxed by slab rate
- Investment value post-buyback is considered a capital loss for the investor
- Buyback is beneficial when capital losses offset other capital gains
As Infosys gears up for India's largest-ever share buyback on November 14, Zerodha CEO Nithin Kamath took to X to explain how the payout will be taxed.
Kamath clarified that proceeds from the buyback, priced at Rs 1,800 against the current market price of around Rs 1,550, will be treated as “income from other sources” and taxed at the investor's slab rate.
Meanwhile, the entire investment value will count as a capital loss, which can be offset against other gains, making the buyback attractive in certain scenarios.
"Infy is one of the most highly held stocks by investors, and the record date for their massive buyback is November 14th, the biggest buyback ever in India. That is, you can participate in the buyback if you hold the shares in your demat account as of November 14," he wrote on X.
Infy is one of the most highly held stocks by investors, and the record date for their massive buyback is November 14th, the biggest buyback ever in India. That is, you can participate in the buyback if you hold the shares in your demat account as of November 14.
I think it is… pic.twitter.com/1dW6w6J2frHe further said that, "I think it is essential to understand how you will be taxed on this. If you participate in the buyback at Rs 1800 (current price is Rs 1550), here's the taxation: The money you receive from the buyback is considered income from other sources and is taxed at your applicable slab rate."
Kamath explained, "the entire investment value is then considered as a capital loss. One scenario where the buyback becomes attractive is when you have other capital gains that can be offset against these capital losses."
And he also clarified to the investors that if the investment was done less than an year ago, then it is a short-term capital loss, and more than an year, it is a long-term capital loss. "Otherwise, it is essentially like a dividend," he said.
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