Bajaj Auto's ₹5,633-crore buyback: How the new buyback tax rules could affect your payout

Bajaj Auto's ₹5,633-crore share buyback opens for eligible shareholders on July 1, offering ₹12,000 per share under the tender offer route. While the buyback price offers a premium over the prevailing market price, investors should also understand how the revised tax rules could affect the amount they ultimately receive.

The buyback, which closes on July 7, is open only to shareholders who held Bajaj Auto shares as of the record date. However, the actual benefit for investors will depend not only on the buyback price but also on the revised tax framework and the number of shares accepted under the offer.

New buyback tax rules explained

"Under the latest tax rules applicable to buybacks paid on or after 1 April 2026, shareholders will no longer be taxed on the entire buyback amount. Instead, tax will be payable only on the actual capital gain, i.e., the difference between the buyback price and the price at which you bought the shares. This is a significant change from the earlier rules, where the full buyback amount was taxed as dividend income at your income tax slab rate," said CA Abhishek Soni, CEO & Co-founder, Tax2win.

"If you held the shares for more than 12 months, this will be treated as a long-term capital gain (LTCG) and taxed at 12.5%. The first ₹1.25 lakh of total LTCG in a financial year remains exempt. If you held the shares for 12 months or less, the gain will be treated as a short-term capital gain (STCG) and taxed at 20%. This replaces the earlier 'deemed dividend' regime (taxed at slab rate) that applied for buybacks paid between October 1, 2024 and March 31, 2026," Soni added.

Not all tendered shares may be accepted

Investors should also remember that tendering shares does not guarantee that every share offered will be bought back.

The final acceptance ratio will depend on the total number of shares tendered by eligible shareholders compared with the number of shares the company intends to repurchase. Shares that are not accepted will remain in the investor's demat account and can continue to be held or sold on the stock exchange.

For shareholders, the ₹12,000 buyback price may look attractive. However, the actual amount they receive will depend on two key factors: the number of shares accepted in the buyback and the capital gains tax payable under the revised rules.