Infosys ₹18,000 Crore Buyback: How Non-Resident Shareholders Will Be Taxed and When DTAA Benefits Apply
New tax rules treat buyback proceeds as dividend income, raising liability for foreign investors
Double Taxation Avoidance Agreements (DTAA) may reduce burden if shareholders file proper documentation
By Our Legal Correspondent
New Delhi: November 21, 2025:
Infosys Limited, India’s second-largest IT services company, has launched its largest-ever share buyback programme worth ₹18,000 crore, opening on November 20, 2025, and closing on November 26, 2025. While the buyback offers shareholders a premium price of ₹1,800 per share, taxation rules introduced in 2024 have made the process more complex, especially for non-resident shareholders (NRIs and foreign investors).
Background of the Buyback
Infosys announced the buyback in September 2025, with the board approving the repurchase of 10 crore shares, representing about 2.41% of total equity. The buyback is being conducted through the tender offer route, allowing shareholders to submit their shares proportionately.
The record date was set as November 14, 2025, meaning only investors holding Infosys shares by that date are eligible.
Taxation Rules: What Changed
Until 2024, buyback proceeds were taxed as capital gains in the hands of shareholders under Section 46A of the Income Tax Act. However, the Finance (No. 2) Act, 2024 amended the law, treating buyback proceeds as dividend income.
Key points:
- Section 2(22)(f) now defines dividend to include payments made by a company on buyback of shares.
- This means entire consideration received by shareholders is taxable as dividend income, not capital gains.
- Companies are required to deduct Tax Deducted at Source (TDS) before paying shareholders.
For resident shareholders, dividend income is taxed at their applicable slab rates. For non-resident shareholders, taxation depends on DTAA (Double Taxation Avoidance Agreement) provisions between India and their country of residence.
Impact on Non-Resident Shareholders
Non-resident shareholders face higher tax liability because dividend income is subject to withholding tax.
- Default rate: 20% withholding tax plus applicable surcharge and cess.
- DTAA relief: If the shareholder’s country has a DTAA with India, the tax rate may be reduced (often 10–15%).
- To claim DTAA benefits, shareholders must submit:
- Tax Residency Certificate (TRC) from their home country.
- Form 10F declaration.
- Other supporting documents as required by Infosys and Indian tax authorities.
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Without these documents, the higher default tax rate applies.
Example Scenarios
1. US-based shareholder: Under the India-US DTAA, dividend income may be taxed at 15%. If proper documentation is submitted, tax liability reduces from 20%+ to 15%.
2. UK-based shareholder: India-UK DTAA allows taxation at 10–15%, depending on conditions.
3. Singapore-based shareholder: India-Singapore DTAA provides relief at 10%.
Thus, DTAA benefits can significantly reduce tax burden, but compliance is essential.
Why This Matters
For NRIs and foreign investors, taxation rules directly affect net returns from the buyback. While Infosys is offering a premium price, the post-tax proceeds may vary widely depending on documentation and DTAA eligibility.
This makes the buyback less attractive for investors who fail to submit required forms, as they may face 20–25% effective tax on proceeds.
Infosys’ Clarification
Infosys has issued detailed guidelines for shareholders on taxation. The company has clarified that:
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- All buyback proceeds will be treated as dividend income.
- TDS will be deducted at source.
- Shareholders must provide TRC and Form 10F to avail DTAA benefits.
- Refunds, if any, can be claimed later by filing income tax returns in India.
Broader Market Impact
Infosys’ buyback is part of a larger trend among IT companies returning cash to shareholders. Buybacks reduce outstanding shares, boosting earnings per share (EPS) and shareholder value.
However, the new taxation rules may discourage participation, especially from foreign investors. Analysts note that while buybacks remain attractive, taxation has become a key factor in decision-making.
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Expert Views
- Treating buyback proceeds as dividend income increases tax liability for many investors.
- DTAA benefits are crucial but require strict compliance.
- Investors should consult tax advisors before tendering shares.
Some experts argue that the new rules may reduce foreign participation in Indian buybacks, as capital gains taxation was more favourable compared to dividend taxation.
Conclusion
The Infosys ₹18,000 crore buyback offers shareholders a chance to benefit from premium pricing and improved EPS. However, taxation rules introduced in 2024 have changed the landscape, especially for non-resident shareholders.
By treating buyback proceeds as dividend income, the law imposes higher tax liability. Relief is available under DTAA agreements, but only if shareholders submit proper documentation.
For NRIs and foreign investors, the key takeaway is clear: participation in the Infosys buyback requires careful tax planning and compliance to maximize returns.
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