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Policy · Financial Services

Dhan CEO comments on new tax rules for share buybacks

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Date
Company
Dhan
What it does
stock broking platform
Kind
Policy
Sector
Financial Services

What they do

Dhan is a stock broking platform that provides investment services to retail and institutional investors

What happened

The Indian government announced new tax rules for share buybacks in the 2026 budget, which will affect how promoters and shareholders are taxed on buyback gains

Why it matters

Jay Prakash Gupta, CEO of Dhan, welcomed the change, saying it improves fairness for retail and minority shareholders by taxing only the profit from…

The details

  • The Indian government introduced new tax rules for share buybacks in the 2026 budget, changing how capital gains are calculated for shareholders.
  • Share buybacks will now be taxed as capital gains, meaning only the profit from the buyback price minus the acquisition cost will be taxed.
  • This change aims to correct a previous distortion where shareholders were taxed on the full buyback amount, not just the actual gain.
  • Retail and minority shareholders will benefit from this change, as it makes the tax system more fair and clear for them.
  • Promoters of domestic companies will face a higher effective tax rate of 22% on buyback gains, compared to 12.5% for standard long-term capital gains.
  • Non-domestic company promoters will pay an even higher rate of 30% on buyback gains.
  • Jay Prakash Gupta, CEO of Dhan, supported the change, saying it improves outcomes for retail and minority shareholders.
  • Siddharth Pai, a venture capitalist, raised concerns about how the new rules define promoters, arguing that it may unfairly penalize institutional investors who hold large stakes but have no operational control.

The bigger picture

  • The new tax rules aim to reduce tax arbitrage and make the system fairer for all shareholders.
  • Previously, share buybacks were taxed at the company level, while shareholders paid no tax on the proceeds, which favored promoters.
  • The change aligns buyback taxation with regular secondary market share sales, ensuring that only actual profits are taxed.
  • Losses from buybacks can now be set off or carried forward, which was not possible under the old system.
  • The distinction between promoters and non-promoters is central to the reform, with promoters facing higher tax rates.

About the business

  • Dhan is a stock broking platform that provides investment services to retail and institutional investors.
  • The company has grown rapidly, becoming a unicorn in the stock broking industry.
  • Dhan's services are available to both individual and institutional investors.
  • The company is based in India and serves a large customer base across the country.

The deal

Type
policy

Founders

  • Jay Prakash Gupta, founder and CEO
  • Siddharth Pai, founding partner of 3one4 Capital

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