Capital Gains Tax Change in Budget 2026: FM Says Buyback for All Shareholders to Be Taxed as Capital Gains

Introduction: A Big Shift in How Buybacks Are Taxed

Budget 2026 has delivered a significant change for equity investors and corporate India. In her Budget speech, the finance minister (FM) announced that share buybacks for all shareholders will now be taxed as capital gains, marking a decisive shift from the earlier buyback tax framework.

This move simplifies taxation, removes long-standing distortions between dividends and buybacks, and aligns India’s tax system more closely with global practices. However, it also alters how investors—especially promoters and high-net-worth individuals—will calculate their tax liabilities.

So what exactly has changed? Why did the government make this move now? And how will it impact retail investors, startups, listed companies, and market sentiment?

Let’s break it down in simple terms.

Understanding Share Buybacks: A Quick Refresher

A share buyback is when a company repurchases its own shares from shareholders, usually at a premium to the market price. Companies typically opt for buybacks to:

• Return surplus cash to shareholders
• Improve earnings per share (EPS)
• Signal confidence in future growth
• Offer a tax-efficient payout alternative to dividends

In India, buybacks have become increasingly popular over the last decade, especially among cash-rich IT and FMCG companies.

How Buybacks Were Taxed Before Budget 2026

Before this Budget 2026 announcement, buybacks were taxed under a special regime:

1. Buyback Tax on Companies (Section 115QA)

• Companies paid a 20% buyback tax (plus surcharge and cess)
• Tax was calculated on the difference between:
• Buyback price, and
• Issue price of shares

2. Shareholders Paid No Tax

• Income received by shareholders from buybacks was exempt
• This applied to:
• Retail investors
• Promoters
• Foreign investors

3. Unequal Treatment vs Dividends

• Dividends were taxed in shareholders’ hands
• Buybacks became a preferred route to distribute profits

This imbalance led to growing concerns over tax arbitrage.

What Budget 2026 Changes: Buybacks Taxed as Capital Gains

The Key Announcement

The finance minister stated that buyback proceeds will now be taxed as capital gains in the hands of shareholders, similar to the sale of shares in the open market.

What This Means

• No separate buyback tax on companies
• Shareholders will pay capital gains tax
• Tax rate depends on:
• Holding period
• Type of shares (listed or unlisted)

This applies uniformly to all shareholders, including promoters and foreign investors.

Capital Gains Tax Rates After the Change

For Listed Shares

Holding Period	Tax Type	Rate
Less than 12 months	Short-term capital gains (STCG)	As per applicable STCG rate
More than 12 months	Long-term capital gains (LTCG)	As per LTCG rules

(Exact rates depend on prevailing capital gains slabs and exemptions.)

For Unlisted Shares

• Longer holding period thresholds apply
• LTCG benefits may include indexation (subject to current law)

Why the Government Changed the Buyback Tax Rule

1. Remove Tax Arbitrage

Companies increasingly preferred buybacks over dividends purely for tax reasons. The new rule creates a level playing field.

2. Simplify Tax Structure

Having different tax mechanisms for dividends and buybacks complicated compliance. Capital gains taxation is already well understood.

3. Improve Transparency

Taxing shareholders directly makes income reporting clearer and easier to track.

4. Align with Global Practices

Most developed markets tax buyback proceeds as capital gains rather than imposing a separate corporate-level tax.

Impact on Retail Investors

For small and retail investors, the impact may be limited but noticeable:

Positives

• Capital gains framework is familiar
• Possibility to offset gains with capital losses
• Holding period benefits apply

Negatives

• Earlier tax-free buyback income is now taxable
• Post-tax returns may reduce slightly

For long-term investors, the impact may be softer due to favorable LTCG treatment.

Impact on Promoters and High-Net-Worth Individuals

Promoters often used buybacks as a tax-efficient way to monetize holdings. That advantage is now reduced.

• Large buyback payouts will attract capital gains tax

• Structuring of payouts may shift back toward dividends

• Promoter exit strategies may need recalibration

Impact on Companies and Corporate Strategy

Reduced Compliance Burden

• No need to calculate and pay buyback tax
• Simpler accounting treatment

Possible Shift in Payout Preferences

• Some companies may return to dividends
• Others may continue buybacks for EPS and valuation reasons

Market Signalling Still Matters

Buybacks remain a strong signal of confidence, even if tax benefits reduce.

Impact on Stock Markets

Short-Term Reaction

• Some volatility in stocks known for frequent buybacks
• Investor reassessment of post-tax returns

Long-Term Outlook

• Neutral to positive
• Tax clarity improves investor confidence
• Reduced policy distortion helps efficient capital allocation

Effect on Startups and Unlisted Companies

For startups and private companies:

• Buybacks often used for early investor exits
• Capital gains taxation may:
• Increase tax outgo for angels and VCs
• Encourage structured secondary sales instead

However, clarity in taxation reduces uncertainty during funding rounds.

Comparison: Dividend vs Buyback After Budget 2026

Aspect	Dividend	Buyback (Post-Budget 2026)
Taxed in hands of	Shareholder	Shareholder
Nature of tax	Income tax	Capital gains tax
Holding period benefit	No	Yes
Loss set-off allowed	No	Yes

This makes buybacks slightly more attractive for long-term investors than dividends.

What Investors Should Do Now

1. Review Holding Periods

Long-term holdings may still enjoy tax efficiency.

2. Track Cost of Acquisition

Accurate records are essential for capital gains calculation.

3. Use Loss Set-Off Strategically

Capital losses can reduce overall tax burden.

4. Consult a Tax Advisor

Especially important for large buyback participation.

Expert Opinions on the Budget 2026 Buyback Tax Change

Many tax experts view the move as structurally sound but sentimentally tough.

• “It removes a long-standing anomaly,” say tax professionals.
• Market analysts believe the impact will be absorbed over time.
• Investor groups are calling for clear implementation guidelines.

Frequently Asked Questions (FAQ)

Q1. What is the major capital gains tax change in Budget 2026?

The government has announced that share buyback proceeds will be taxed as capital gains in shareholders’ hands.

Q2. Is buyback tax on companies removed?

Yes, the earlier buyback tax paid by companies is replaced with shareholder-level capital gains taxation.

Q3. Will retail investors have to pay tax on buyback income now?

Yes, buyback income will no longer be tax-free for retail investors.

Q4. Does this apply to both listed and unlisted companies?

Yes, though capital gains rules differ based on whether shares are listed or unlisted.

Q5. Will companies stop doing buybacks?

Not necessarily. Buybacks may still be used for EPS improvement and valuation support.

Conclusion: A Structural Reform with Short-Term Pain

The capital gains tax change in Budget 2026 marks a decisive step toward tax neutrality and simplicity. By taxing buybacks as capital gains for all shareholders, the government has closed a major loophole and aligned payouts with global norms.

While investors may feel a short-term pinch, the long-term benefits include clarity, fairness, and a more efficient tax system. Buybacks will continue—but now as a strategic choice rather than a tax-driven one.

For investors, the message is clear: understand your holding period, plan your taxes smartly, and adapt to the new rules.

Capital gains tax change Budget 2026

Gold Is Still a Safe Bet, But Why Silver Is Not

Gold Is Still a Safe Bet, But Why Silver Is Not

Introduction: Gold Shines, Silver Slips

For centuries, gold and silver have been grouped together as precious metals, symbols of wealth, and stores of value. 

When inflation rises, markets crash, or geopolitics turns unstable, investors instinctively turn to these metals for safety.

Yet, in modern financial markets, gold and silver no longer enjoy equal status. While gold continues to attract investors as a dependable hedge against uncertainty, silver often fails to inspire the same confidence.

This raises an important question: If gold is still considered a safe bet, why isn’t silver?

The answer lies in their fundamentally different roles, demand patterns, price behavior, and market perception. This article explores in depth why gold maintains its safe-haven reputation while silver struggles to live up to it.

Gold vs Silver: Same Family, Different Roles

At first glance, gold and silver appear similar. Both are rare, tangible assets that cannot be printed by central banks. However, their economic identities are very different.

Gold is primarily:

• A store of value
• A monetary metal
• A central bank reserve asset

Silver, on the other hand, is:

• Largely an industrial metal
• Tied to manufacturing cycles
• Influenced heavily by economic growth and slowdown

This single difference explains much of the gap in their investment appeal.

Why Gold Is Still a Safe Bet

1. Gold’s Timeless Role as a Store of Value

Gold has preserved wealth for over 5,000 years. From ancient civilizations to modern economies, gold has consistently been seen as money or a close substitute.

Unlike paper currencies:

• Gold cannot be devalued by excessive printing
• Its supply grows slowly and predictably
• It retains purchasing power over long periods

Even today, during inflationary phases or currency depreciation, gold prices tend to rise, reinforcing its image as a reliable hedge.

2. Central Banks Trust Gold, Not Silver

One of the strongest reasons gold remains a safe bet is central bank demand.

• Central banks across the world hold thousands of tonnes of gold

• Gold is part of official foreign exchange reserves

• Silver is virtually absent from central bank balance sheets

When institutions responsible for global monetary stability trust gold, it sends a powerful signal to investors. Silver lacks this institutional backing, weakening its safe-haven credentials.

3. Gold Performs Well in Crises

Gold historically performs best when:

• Inflation is high
• Interest rates are low or negative
• Stock markets are volatile
• Geopolitical risks increase

During global crises such as financial crashes, pandemics, wars, or banking failures, gold often moves in the opposite direction of risky assets. This negative correlation makes it valuable for portfolio diversification.

Silver, by contrast, frequently falls during economic downturns because industrial demand collapses.

4. Gold Has Lower Price Volatility

Stability is essential for any asset considered “safe.” Gold prices, while not static, are far less volatile than silver.

• Gold price swings are relatively moderate

• Long-term trends are easier to identify

• Sudden crashes are rare compared to silver

Silver can experience sharp rallies—but also brutal corrections—making it unreliable as a defensive asset.

5. Gold Is Universally Liquid

Gold markets are deep and liquid:

• Traded globally 24/7

• Easy to buy and sell in physical and digital forms

• Accepted across countries and cultures

In times of crisis, liquidity matters. Gold can be converted to cash quickly without significant loss. Silver markets, while liquid, are smaller and more prone to disruption.

Why Silver Is Not Considered a Safe Bet

1. Silver Is Primarily an Industrial Metal

Over 50% of silver demand comes from industrial use, including:

• Electronics
• Solar panels
• Electric vehicles
• Medical equipment

This makes silver highly sensitive to economic cycles. When growth slows or factories shut down, silver demand drops sharply pulling prices down.

Gold, in contrast, is barely used industrially.

2. Silver Suffers During Recessions

Safe-haven assets are expected to rise when economies weaken. Silver often does the opposite.

During recessions:

• Manufacturing activity declines

• Industrial demand for silver falls

• Prices come under pressure

This behavior contradicts the very definition of a safe-haven asset.

3. Extreme Price Volatility Undermines Trust

Silver is notorious for dramatic price swings.

• Prices can double quickly—but also halve just as fast
• Influenced by speculation and leveraged trading
• Vulnerable to sudden market sentiment shifts

Such volatility may appeal to traders, but it repels conservative, long-term investors seeking stability.

4. Silver Is Heavily Influenced by Speculation

Silver markets are smaller than gold markets, making them easier to manipulate.

• Futures trading dominates price discovery

• Speculative positions often drive short-term movements

• Prices can disconnect from fundamentals

This speculative nature weakens silver’s credibility as a dependable store of value.

5. Storage and Practical Issues

While silver is cheaper per ounce, it presents practical challenges:

• Requires much more space than gold
• Higher storage and insurance costs
• Less convenient for large investments

Gold’s high value density makes it easier to store and transport, adding to its appeal.

Gold vs Silver: Investment Behavior Compared

Factor	Gold	Silver
Safe-haven status	Strong	Weak
Central bank demand	High	Negligible
Industrial dependency	Very low	High
Price volatility	Moderate	Very high
Crisis performance	Positive	Often negative
Long-term stability	Strong	Inconsistent

Why Silver Sometimes Looks Attractive (But Isn’t Safe)

Silver often attracts investors during bull markets because:

• It is cheaper per unit
• It tends to outperform gold during economic booms
• Industrial demand boosts prices during growth phases

However, these same factors make silver cyclical rather than defensive. Silver performs best when risk appetite is high—not when fear dominates markets.

Inflation Hedge: Gold Wins Again

While both metals can rise during inflation, gold is more reliable because:

• It is not tied to industrial consumption
• It benefits from currency debasement fears
• Investors flock to it when real interest rates fall

Silver’s inflation performance depends heavily on whether economic growth accompanies rising prices.

The Psychological Factor: Trust and Perception

Investment markets run as much on psychology as fundamentals.

Gold is trusted because:

• It has been money for millennia

• Governments and institutions hold it

• It symbolizes stability and security

Silver lacks this psychological anchor. Investors see it as a hybrid asset, neither fully safe nor fully growth oriented.

Should Investors Ignore Silver Completely?

Not necessarily.

Silver can still play a role:

• As a tactical investment
• As a hedge against industrial growth cycles
• For short- to medium-term opportunities

But silver should not replace gold as a core defensive holding.

How to Use Gold and Silver Together

A balanced approach may include:

• Gold as a long-term wealth preserver
• Silver as a satellite allocation for growth phases
• Limited exposure to silver to manage volatility

This strategy recognizes the strengths and weaknesses of both metals.

Conclusion: Gold Protects, Silver Speculates

Gold remains a safe bet because it does exactly what a safe-haven asset should do: preserve wealth, provide stability, and perform during uncertainty.

Silver, despite its historical significance, has evolved into a metal driven largely by industrial demand and speculation. Its volatility, economic sensitivity, and lack of institutional support prevent it from being a true safe haven.

In simple terms:

• Gold protects capital
• Silver chases opportunity

For investors seeking security in turbulent times, gold continues to shine—while silver remains a risky companion rather than a shelter.

Frequently Asked Questions (FAQ)

Is silver a bad investment?

No, but it is not a safe-haven investment. Silver is better suited for growth-oriented or tactical strategies.

Why do investors prefer gold over silver during crises?

Gold holds value during uncertainty, while silver prices often fall due to declining industrial demand.

Can silver outperform gold?

Yes, during economic expansions. But it usually underperforms during recessions or financial stress.

Is gold completely risk-free?

No investment is risk-free, but gold is among the most stable assets over the long term.

Should beginners invest in gold or silver?

Beginners looking for safety should prioritize gold. Silver may be added later for diversification.

1.    why gold is a safe investment