Infosys Buyback: Nithin Kamath Highlights Tax Traps for Investors
As the record-breaking Infosys buyback of ₹18,000 crore approaches, Zerodha co-founder Nithin Kamath is urging investors to be mindful of potential tax implications. With the record date set for November 14, Kamath emphasized the necessity of understanding the tax consequences tied to this major financial event.
Key Tax Implications of the Infosys Buyback
– Nature of Gains: Gains from the buyback will be classified as income from other sources, subjecting them to taxation at the investor’s applicable slab rate.
– Capital Loss: The full investment amount may be treated as a capital loss, complicating the perceived windfall of the buyback.
– Eligibility: Only investors holding Infosys shares in their demat accounts as of the record date can participate in the buyback.
– Investing Scenarios: The buyback could only be beneficial under certain conditions, such as having other capital gains to offset against these capital losses. If shares were held for over a year, the loss qualifies as a long-term capital loss.
Kamath pointed out that Zerodha offers tools to assist investors in calculating their potential tax burdens related to this transaction.
An Overview of Infosys’ Largest Buyback
– Announcement Date: September 12, 2025.
– Details: Infosys plans to repurchase 10 crore shares at ₹1,800 each, reflecting a 19% premium over the previous market price at announcement.
– Equity Impact: This buyback represents approximately 2.41% of the company’s paid-up equity capital, marking its fourth buyback since 2017. Notably, the company’s promoters, including co-founders N.R. Narayana Murthy, Nandan Nilekani, and Sudha Murty, have chosen not to participate.
Investor Sentiment Ahead of the Record Date
Analysts are optimistic about the prospects of Infosys shares, with predictions suggesting that the stock may trade between ₹1,550 and ₹1,600 shortly. This event is seen as a favorable opportunity for existing shareholders aiming for short-term gains, given that shares currently reflect a 16% premium compared to the buyback price.
In conclusion, while the Infosys buyback presents an exciting opportunity for investors, understanding the associated tax ramifications is crucial for maximizing potential gains. Investors are encouraged to verify their eligibility and prepare accordingly.