TDS on Infosys buyback: Conditions under which tax will not be deducted

Infosys' much-awaited ₹18,000 crore share buyback opened on November 20, but a recent change in income tax rules has triggered widespread confusion among shareholders about how their buyback proceeds will be taxed.

However, there are certain scenarios where tax will not be deducted, or may be deducted at a lower rate.

1. No TDS will apply under Section 194 if a resident individual’s total dividends, including buyback amounts, remain within ₹10,000 during FY 2025–26.

"However, no tax shall be deducted to resident individual shareholders if the total of all dividends and buyback consideration to be received during financial year 2025-2026 does not exceed in aggregate ₹10,000," according to the FAQ on Tax Deduction on Buyback released by Infosys.

2. Resident shareholders may also claim Nil TDS by filing the appropriate self-declaration forms, subject to meeting eligibility criteria under the Income Tax Act, 1961.

"However, there are certain resident shareholders on whom TDS is not applicable subject to appropriate declaration and documentations to establish that they are eligible for such TDS exemption," the FAQ notes.

• They have a valid PAN.

• Tax on their estimated total income for the year is nil.

• Their total income, after including amounts declared under all Form 15Gs, does not exceed the basic exemption limit (₹2,50,000 under the old regime; ₹4,00,000 under the new regime).

• They have a valid PAN.

• Their estimated total tax liability for the year is nil.

• Their income is computed after Chapter VIA deductions and/or set-off of losses under “Income from House Property”

3. Resident shareholders may also submit a declaration citing relevant provisions of the Income Tax Act, or provide a Lower Tax Deduction Certificate (LTDC) issued by the Income Tax Department under Section 197, allowing Infosys to deduct TDS at a lower rate.

As per the FAQ, all tax declarations and certificates must be uploaded via the shareholders’ portal before the last date of tendering. No documents will be accepted after that. If required forms become invalid during the year, TDS will be applied at standard rates on the entire dividend and buyback payments.

Infosys buyback window

The record date to determine eligible shareholders was November 14, meaning only those holding Infosys shares in their demat accounts on that date can participate.