[Analysis] Wipro’s Share Buy-Back | Capital Gains Tax vs Open Market Sale

Wipro's Share Buy-Back announced on April 16, 2026, proposing to repurchase up to 60 crore equity shares at ₹250 per share—a premium of over 16% to its 60-day volume-weighted average price—has brought a critical tax planning question back to the fore for both promoters and retail investors: is it more beneficial to tender shares in the buy-back or sell them on the open market? The answer turns significantly on the Finance Act, 2026, which with effect from April 1, 2026, has restored the capital gains framework under the Income Tax Act, 2025 for buy-back proceeds, replacing the short-lived "deemed dividend" regime that operated between October 2024 and March 2026. While this shift is broadly welcome, promoters face an additional tax levy introduced under the amended provisions—making the decision to participate in the buy-back a more nuanced one than it may appear. This article provides a structured, computation-backed comparison of the tax implications under both routes to help shareholders evaluate their options before the buy-back window opens.

Table of Contents

1. Tax Treatment When Shares Are Tendered in the Buy-Back
2. Additional Tax on Promoters
3. Tax Treatment When Shares Are Sold on the Exchange
4. Comparative Analysis
5. Conclusion

On April 16, 2026, Wipro Limited announced a major share buy-back programme, proposing to acquire up to 60 crore fully paid-up equity shares, representing approximately 5.72% of its total paid-up equity share capital. The buy-back price is set at Rs. 250 per share, which represents a premium of approximately 16.30% over the volume-weighted average market price for the 60 trading days preceding the board meeting notification and 28.51% over the 10-day VWAP.

Unlike the Infosys buy-back of 2025, where promoters chose not to participate, Wipro’s promoter group, led by Azim Premji and related entities holding approximately 72.62% of the equity, has expressed its intention to participate in the buy-back. This decision carries significant tax consequences, particularly given the amendments introduced by the Finance Act, 2026.

The tax considerations are equally important for non-promoter investors evaluating whether to tender their shares in the buy-back or sell them in the open market. This article provides a comparative analysis of the tax implications under both scenarios.

1. Tax Treatment When Shares Are Tendered in the Buy-Back

A buy-back occurs when a company repurchases its own shares from existing shareholders, typically at a premium to the current market price. The tax treatment for such transactions has undergone significant changes over the years.

The most recent change has been brought about by the Finance Act, 2026, which has substituted sub-sections (2) and (3) of Section 69 of the Income Tax Act, 2025 (ITA 2025), corresponding to Section 46A of the ITA 1961. Under the amended provisions, effective from April 1, 2026, the consideration received by a shareholder on the buy-back of shares is once again treated as capital gains in the hands of the shareholder. This marks a departure from the regime that prevailed between October 1, 2024 and March 31, 2026, during which buy-back proceeds were taxed as “deemed dividends” under Section 2(22)(f) of the ITA 1961.

Under the current regime (effective April 1, 2026), the capital gains are computed as the difference between the buy-back price (full value of consideration) and the cost of acquisition. For listed equity shares, if held for more than 12 months, the gains are treated as long-term capital gains (LTCG) and taxed under Section 198 of the ITA 2025 (corresponding to Section 112A of the ITA 1961) at 12.5% on gains exceeding Rs. 1,25,000. If held for 12 months or less, the gains are short-term capital gains (STCG) taxed under Section 196 (corresponding to Section 111A) at 20%.

2. Additional Tax on Promoters

A notable feature of the Finance Act, 2026 amendment is the levy of an additional tax on promoters who tender shares in the buy-back. For promoters who are not domestic companies, the additional tax rate is 10% on STCG and 17.5% on LTCG. For promoters that are domestic companies, the additional rates are 2% on STCG and 9.5% on LTCG. A 12% surcharge is levied on this additional tax. The final tax liability of promoters on the buyback of listed shares will be as follows:

Where the buy-back results in a capital loss (i.e., the cost of acquisition exceeds the buy-back price), such loss can be set off against other capital gains in accordance with the provisions of the Act. A short-term capital loss can be set off against both short-term and long-term capital gains, while a long-term capital loss can be set off only against long-term capital gains. Unabsorbed capital losses can be carried forward for eight tax years.

3. Tax Treatment When Shares Are Sold on the Exchange

As w.e.f. 01-04-2026, the buyback of shares results in capital gains, the tax liability shall remain the same, notwithstanding that the shares are sold in the buyback or in the open market. However, for promoters, the tax liability will be lower if the shares are sold in the open market rather than tendered in the buyback. Where shares are sold on the exchange, STCG and LTCG are taxed at 20% and 12.5%, respectively, rather than at 22% (promoter co.) or 30% (other promoters).

4. Comparative Analysis

The following computation illustrates the tax implications for different investors under both scenarios – shares tendered in the buy-back vs. retained and sold later in the market. The analysis assumes that the expected market price after the buy-back settles at Rs. 220 per share.

Note – Surcharge and health & education cess have not been considered in the computation of tax to simplify the illustration. For Mr A and Mr B, the exemption of Rs. 1,25,000 under Section 198 has been considered by limiting the exemption to the extent of the capital gain.

5. Conclusion

The comparative analysis above shows that, under the revised regime, tendering shares in the buy-back is more favourable for promoters and non-promoters than selling in the open market. This is primarily because the buy-back price of Rs. 250 offers a significant premium over the expected post-buy-back market price of Rs. 220. The capital gains tax treatment ensures that the tax incidence is computed only on the actual profit, making the buy-back an attractive proposition for shareholders.

The shift from the deemed dividend regime back to the capital gains regime is a welcome change that aligns the tax treatment more closely with the economic substance of the transaction.

Disclaimer – This article aims to provide a comparative understanding of the tax implications and does not suggest any particular course of action.