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Global routes blocked, local prices shocked.

EconomyExplained Globitax

Earlier, when a company did a buyback,
it had to pay buyback tax under Section 115QA at around 20%.

What went wrong next:

Then the rules changed.
Buyback was taxed in the hands of the shareholder
as deemed dividend —
on the entire buyback amount,
and cost of acquisition could not be set off.

The big 2026 change:

Now comes the real reform.

The government has rationalised buyback taxation.
Buyback gains will now be taxed as capital gains, not dividend.

Tax rates:

• Retail shareholders: 12.5% (long term)
• Private companies: 22%
• Promoters: 30%

Numerical example:

Let me give you a simple example.

Mr A is a retail shareholder.
Buyback amount: ₹3 lakhs
Cost of acquisition: ₹2 lakhs

Earlier, tax was 30% on ₹3 lakhs.

Now, only the gain of ₹1 lakh is taxed
and that too at 12.5%.

And if Mr A’s total long-term capital gains in the year are below ₹1.25 lakhs,
this tax can be completely exempt.

Company-side benefit:

How does the company benefit?

Even if earnings stay the same:
• EPS goes up
• ROE improves

And most importantly,
it sends a positive signal to the market
that management is confident about
the company’s future cash flows.

That’s why this reform is a true win-win,
for companies, shareholders, and capital allocation in India.

WHY buyback rationalisation was needed?

“The most interesting part of the Union Budget 2026 is the rationalisation of buyback taxation in India.”

Flow:

Let’s understand why this was even necessary.

After corporate tax was rationalised in 2019, a lot of Indian companies started generating huge free reserves.

Now when a company has surplus cash, it has two choices:
retain it… or distribute it.

Distribution choices:

If it wants to distribute, again there are two options:
Dividend or Buyback.

The problem earlier:

When a company pays dividend, it gets added to the shareholder’s income
and is taxed at around 30%.

When a company does a buyback, that also became taxable in the hands of shareholders.

And this is where the problem started.

Transition to reform:

The tax structure had made capital distribution inefficient.

That’s why the government changed the dynamics.

The new buyback taxation aims to create a win-win for both
the company and the shareholder.

CTA:

Follow my next reel to understand how exactly this works with numbers.

India pays the SAME tax.
Yet global tax drops.
No tax evasion.
No India tax loss.
Just smarter structuring.

➡️ Scenario 1: India ➝ US
Global tax: 21.4%
➡️ Scenario 2: India ➝ UAE ➝ US
India tax: unchanged
Global tax: ~16%

📉 Same business
📉 Same total profit
📉 Lower global tax
Because where profit sits matters more than where sales happen.

⚠️ Requires:
✔ Proper transfer pricing
✔ Real substance
✔ Clean documentation
This is legal tax efficiency, not shortcuts.

👉 Follow for real-world tax & business structuring insights

TransferPricing ReelsForBusiness

Dubai is quietly becoming a serious global finance base.

DIFC has now crossed 100+ hedge fund managers.
And 81 of them are billion-dollar managers — meaning they manage $1B+ of client money (AUM), not personal wealth.

Why this matters:
• Big funds move only where rules are clear and systems are trusted
• More funds in one place = more capital, more deals, more high-quality networks
• It also means higher standards, structure, reporting, compliance, clean books

For NRIs and Dubai business owners, this is a strong signal that Dubai’s ecosystem is maturing fast.

If you want, comment “DIFC” and I’ll share a simple checklist on what businesses should keep ready.

UK is tightening the rope.
UAE is opening doors. 🌍
Wealth doesn’t “disappear”… it moves.
Are you moving with it, or staying behind?