Tax Tangle: Why Infosys Promoters Rejected ₹18,000 Crore Buyback Offer
Infosys recently announced a massive ₹18,000 crore share buyback at ₹1,800 per share, but its promoters, including Nandan Nilekani and Narayana Murthy, chose not to participate.
Infosys promoters rejected the company’s ₹18,000 crore buyback offer because of recent tax changes that make selling shares through a buyback less profitable than selling them on the open market.
An amendment to the Income Tax Act now treats buyback proceeds as regular dividend income, resulting in a higher tax burden for high-income investors.
The tax changes took effect on October 1, 2024, altering the financial calculations for large shareholders and promoters, including founders N.R. Narayana Murthy and Nandan Nilekani.
The reason? Taxation issues.
The Tax Conundrum:
Earlier, buyback proceeds were taxed at the company level.
However, after the July 2024 amendment to the Income Tax Act, the entire amount received from a buyback is now treated as dividend income for the shareholder.
This means that if a promoter sells shares in the buyback, the entire ₹1,800 per share is taxed at their individual income tax rate.
The Tax Burden:
For high-income individuals (earning above ₹1 crore a year), the effective tax rate becomes 35.88% — including a 30% base rate, surcharge, and cess.
After paying this tax, the shareholder effectively receives around ₹1,154 per share.
Why Open-Market Sale is More Attractive :
If the promoters sell their shares through the open stock market, the gain is treated as long-term capital gains (LTCG).
LTCG on listed shares is taxed at 14.95% (including surcharge and cess).
The tax applies only on the profit portion, i.e., the difference between the sale price and the original purchase price.
The Verdict :
Even though the buyback price of ₹1,800 offers a ₹271 premium over the current market price, the higher tax burden makes it less profitable.
Infosys promoters prefer the more tax-efficient open-market sale option instead.
In Nutshell :
The tax implications of the buyback offer made it less attractive to Infosys promoters, who instead prefer to sell their shares through the open market to take advantage of more favorable tax rates.
Team- Intellex Strategic Consulting Private Limited
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