UNI Analysis: Tax relief for some, market pain for many

Contributing sentiments towards policy:

57% : Share buyback proceeds will now be taxed as capital gains, with effective rates of about 22 per cent for corporate promoters and 30 per cent for non-corporate promoters, while regular shareholders pay the standard 12.5 per cent long-term capital gains tax or 20 per cent short-term capital gains tax.
55% : The most immediate and severe market impact came from the government's decision to substantially increase the securities transaction tax on futures and options trading, effective April 1, 2026.
54% : The result is a Budget that reassures on macro stability and long-term manufacturing competitiveness, but jars on market microstructure, disappoints on capital gains tax relief that investors had priced in, and offers little immediate solace to equity market participants or corporate treasurers wrestling with tighter liquidity and elevated borrowing costs in an increasingly fragmented global environment.
54% : The evolution of buyback taxation reflects three distinct regulatory regimes.
53% : New Delhi, Feb 2 (UNI) union Budget 2026 delivered a split verdict for Corporate India, offering measured tax rationalisation and incremental investment incentives while triggering one of the sharpest market corrections in recent memory.
53% : The new structure eliminates this double taxation by treating the difference between buyback consideration and acquisition cost as capital gains, while the additional levy on promoters addresses their distinct position and influence in corporate decision-making.
51% : Yet the immediate market reaction told a starkly different story: a steep hike in securities transaction tax on derivatives, the second in 18 months, triggered one of the sharpest post-Budget sell-offs in recent history, wiping out nearly Rs 13 lakh crore in market value and sending brokerage stocks plummeting as much as 17 per cent.
50% : Companies were required to withhold 10 per cent TDS on payouts to resident investors (payouts above Rs 5,000) and 20 per cent on payouts to non-residents, subject to tax treaties.
50% : This should revive buyback activity, which had slowed sharply under the dividend-based taxation framework introduced in Budget 2024.
49% : The Finance Minister also steered clear of the long-pending request to waive capital gains tax for foreign portfolio investors, in line with global norms; that request was not approved.
47% : The Finance Bill 2026 restores a capital gains framework for share buybacks and introduces differential rates for promoters -- a nuanced reform that addresses tax arbitrage concerns while providing meaningful relief to retail investors.
46% : While industry bodies praised fiscal discipline and targeted manufacturing support, investors reacted negatively to the absence of capital gains tax relief and a steep increase in derivative trading costs -- the second such hike in 18 months.
44% : The sell-off overshadowed a more measured rationalisation of buyback taxation and a quiet liberalisation of foreign ownership caps that, while structurally sound, are unlikely to alter near-term capital flows.
44% : Prior to October 2024, companies paid a buyback distribution tax, while shareholders received the proceeds tax-free.
44% : Companies also benefit under the new structure, as they no longer need to pay buyback distribution tax, making buybacks a cleaner and more efficient mechanism for returning surplus cash.
42% : One notable tax change from a market perspective was the overhaul of buyback taxation.

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