You may register your interest and the questions that you’d like us to discuss at: https://forms.gle/1iR2xaFKGBU1kRJ3A
Our resource centre on RPTs can be accessed at: https://vinodkothari.com/article-corner-on-related-party-transactions/
Some of our recent resources on the subject:
SEBI approves relaxed norms on RPTs
Moderate Value RPTs : Interplay of disclosure norms and impracticalities
– Payal Agarwal, Partner | corplaw@vinodkothari.com
An August 2025 Informal Guidance by SEBI for Welspun Corp Limited sought to clarify the applicability of contra trade on release of pledge. However, it goes on to say that: “…in case of creation of pledge/ revocation, the beneficial ownership does not change till pledge is invoked”. While the IG was specific to revocation of pledge, this seems to be creating a confusion on the contra trade restrictions on creation of pledge. In this article, we discuss the nature of pledge as a trade, and applicability of trading related restrictions on various stages of pledge. Also see a detailed article on treatment of various stages of pledge as trading under PIT Regulations.
Any opposite trade within 6 months of a prior trade attracts violation of contra-trade, except in case of specific waiver for a bona fide purpose. We discuss various combinations of trades within a span of 6 months to understand whether such trades attract contra-trade restrictions.
| Transaction 1 | Transaction 2 | Is it contra-trade? | Can a waiver be granted by CO? |
| Purchase of shares (Buy) | Creation of pledge (Sell) | Yes, opposite trades within 6 months | Yes, if the DP is able to demonstrate the urgency and bona fide nature of such transaction |
| Creation of pledge (Sell) | Purchase of shares (Buy) | Yes, opposite trades within 6 months | In such a case, it is very difficult to prove bona fide of the subsequent trades of purchase of shares after creation of pledge. |
| Creation of pledge (Sell) | Release of pledge | No, since the release of pledge does not result in an opposite trade per se, it is incidental to the primary trade of pledge creation and only restores back the position as it was prior to creation of pledge. | NA |
| Release of pledge | Creation of pledge with another person (Sell) | No | Yes, if the DP is able to demonstrate the urgency and bona fide nature of the underlying transaction for which the pledge is to be created |
| Purchase of shares (Buy) | Invocation of pledge (Sell) | No, since the invocation of pledge is not at the discretion of the shareholder. The relevant act of disposal of shares is taken into account as a “trade” upon creation of pledge itself, and hence, not considered as “trade” again, upon such invocation. | NA |
| Invocation of pledge (Sell) | Purchase of shares (Buy) | NA |
How does the Compliance officer verify/ensure that the purpose of the pledge is bonafide?
There cannot be any sure or one-size-fits-all response to this. Pledge is not for its own sake; pledge for an underlying transaction, which may be margin trading facility, borrowing, etc. The Compliance Officer should see whether that underlying transaction is within the regular business or activity of the pledgor. Whether the pledge is limited to the shares of the listed entity or has other securities? Whether the pledgee is an entity which is engaged in providing similar facilities to several unrelated entities? Whether the timing of the pledge is not indicating the advantage of a price spurt, etc.
The applicability of contra trade restrictions on the various stages of pledge are tabulated hereunder:
| Stage of pledge | Nature of trade (Acquisition/ Disposal) | Pre-clearance required? | TWC applicable? | Contra-trade restrictions applicable? | Remarks |
| Creation of pledge | Disposal | Yes | No, if the trade is bona fide | Yes | While creation of pledge amounts to trade, exemptions from TWC and contra trade may be availed if the trade is for bona fide purpose. |
| Release of pledge | Acquisition | No | No | No | No change in beneficial ownership, and no actual acquisition/ disposal – mere restoration of the position prior to creation of pledge |
| Notice of invocation of pledge | NA | NA | NA | NA | No dealing in securities, mere notice specifying intent |
| Invocation of pledge | Disposal, however, continuation of the prior action of creation of pledge | No | NA | No | Invocation of pledge is done by the pledgee upon default. Once a pledge is created, the pledgor has no control over the invocation of such pledge upon default. Further, since creation of pledge is itself considered as ‘disposal’, the same shares cannot be considered to have been ‘disposed’ again, upon invocation. |
| Sale of pledged securities | Disposal, however, continuation of the prior action of creation of pledge | No (however, intimation to CO post sale, if not covered by System Driven Disclosure) | NA | No | Sale of pledged securities is done by the pledgee, and is not under the control of the pledgor. Further, since creation of pledge is itself considered as ‘disposal’, the same shares cannot be considered to have been ‘disposed’ again, upon sale. |
Watch our video here: https://youtu.be/toXUw96L5jo
Simrat Singh | Finserv@vinodkothari.com
SEBI has issued a Consultation Paper on 05.02.2026 proposing amendments to the InvIT Regulations related to end-use of borrowings, status of SPVs and investment in under-construction projects. Further, it has also proposed to enhance the investible options for both REITs and InvITs w.r.t liquid mutual funds.
InvITs and REITs have continued on a strong upward growth trajectory. As of November 2025, the aggregate AUM of 27 InvITs stood at approximately ₹7,00,000 Crores after growing at a CAGR of approx 18% per annum since FY 21. The assets spann nine infrastructure sectors including roads, telecom, and power, as well as emerging asset classes such as warehouses and educational infrastructure. Reflecting their expanding scale and leverage capacity, aggregate borrowings of InvITs have crossed ₹2,03,000 Crores1. In contrast, REITs continue to trail InvITs in terms of scale, with the combined AUM of the five listed REITs amounting to approximately ₹2,35,000 Crores during the same period.2 May refer to our article “Roads to Riches: A Snapshot of InvITs in India”.
SEBI has consistently sought to create a more enabling regulatory environment for these vehicles. A notable example is the classification of REIT units as equity for mutual funds (as discussed below), which sought to enhance institutional participation and liquidity. Complementing these regulatory efforts, the Union Budget 2026 introduced several targeted measures to deepen infrastructure financing, including the proposed Partial Credit Enhancement (PCE) framework and the creation of a dedicated infrastructure fund (see our write-up on the Budget 2026 here). Lastly, RBI in its Statement on Developmental and Regulatory Policies also allowed Banks to lend to REITs, putting them on same footing as InvITs (see our write-up on RBI’s Statement here). Taken together, these developments indicate that the growth trajectory of InvITs and REITs is expected to remain firmly positive.
Read more →– Team Corplaw | corplaw@vinodkothari.com
NFRA moved the needle, and it is to be seen if the ocean starts boiling.! A 7th Jan 2026 circular from NFRA, addressed to listed entities and their auditors, seemed like an attention-drawer to standards of auditing which are already there, and yet, the auditing fraternity is holding meetings with boards and senior management of listed entities, to comply with what was always a compliance requirement. Does the 7th Jan circular bring up any new boxes to be ticked, any new procedures to be laid or responsibilities to be reiterated? As we detail out in this article, there may be need for action on several fronts on the part of listed entities – identification of nodal persons, listing developments that need to be communicated, constituting team for responding to the findings of the auditors in course of their audit other than those that sit in the audit report, formation of sub-groups of TCWG, etc.
Read more →– Team Corplaw | corplaw@vinodkothari.com
– Vinod Kothari and Payal Agarwal | corplaw@vinodkothari.com
Finance Bill, 2026 brings tax relief to investors for share buybacks, by partially restoring the position that existed before the Finance Bill 2024 amendment. The 2024 Finance Bill changed the taxability of buybacks to impose tax on buyback consideration, taxing the entire “receipt” as “dividend”, implying tax at applicable regular tax rates rather than as capital gains.[See our article on the 2024 amendments here.]
The 2026 Bill proposes omission of Section 2(40) (f), [dealing with deemed dividend] and amendments to Section 69, [specifically dealing with tax on buybacks]. The net result of this:
Applicability of the amendments: The amended provisions apply for buybacks done on or after 1st April, 2026. The existing provisions were introduced effective 1st Oct., 2024 and therefore, they would have had a life of only 15 months.
Buyback is not merely a means of distribution of profits to the shareholders. There may be various reasons or motivations for which buyback may be done by a company, for example:
For detailed guidance on the procedure and compliances involved, refer to our FAQs on buyback here.
Figure 1: Buyback process and timelines under Companies Act
For buyback of capital beyond the statutory limits, the provisions of capital reduction u/s 66 apply. With the buyback consideration being taxed as deemed dividends, capital reduction through NCLT route was also being seen as an alternate route for scaling down capital in a relatively tax-efficient manner. There are rulings favouring capital reduction as an alternative to buyback, for instance, the ruling of NCLAT in the matter of Brillio Technologies Pvt. Ltd v. ROC, subsequently also referred to by NCLT Mumbai in the matter of Reliance Retail Ltd. Some of these rulings even permitted selective reduction of capital. See our article on reduction of capital here.
One of the primary deterrents in capital reduction u/s 66 of the Companies Act is the approval requirements – of the shareholders, creditors and even the NCLT.
The scope of dividend distribution is quite narrower as compared to share buybacks. The primary difference between the two is in the source of payment. Dividend distribution can be made only out of surplus; where free reserves are proposed to be utilised for dividend payment, additional conditions are applicable. In no case, can such declaration be made out of securities premium, or proceeds of fresh issuance – which are permissible sources for buyback. Buyback, on the other hand, requires mere liquidity, availability of profits is not mandatory. Therefore, dividends are merely a way to upstream the earned profits; buyback can even be the way to scale down, for example, by releasing the share premium, or using one class of shares to buy back the other.
Once dividend is approved by shareholders with requisite majority, there is no provision for a shareholder to waive off his right to the dividend [see our article on the same here], and unclaimed dividend, if any, are kept in a separate account to be transferred to IEPF. In case of buyback, while the same is also offered to all shareholders, the buyback consideration is paid only to such shareholders who tender their shares for buyback; the question of waiver of rights or unclaimed amounts does not arise.
| Particulars | Finance Bill, 2024 | Finance Bill, 2026 |
| Applicability for buybacks done | w.e.f. 1st October, 2024 | w.e.f. 1st April, 2026 |
| Taxable as | Deemed dividend. The holding cost of the bought back shares allowed as short term capital loss | Capital gains |
| Tax incidence on | Recipient shareholder | Recipient shareholder |
| Amount taxable | Entire buyback consideration | Gains on buyback, that is, Buyback consideration minus, cost of acquisition |
| Rate of tax | Applicable income tax slab rate | LTCG – 12.5%, subject to exemption upto Rs. 1.25 lacs STCG: 20% In case of promoters: 22%/ 30% (depending on whether domestic company/ otherwise) |
| Differential treatment for promoter shareholders | No | Yes, additional tax rates apply |
Under the erstwhile regime, the entire buyback consideration was taxable as deemed dividend, with the cost of acquisition claimable as capital loss. In such a case, the higher the cost of acquisition on such shares, higher would have been disincentive in the form of taxing the cost component as dividends. The benefits of capital loss depend on the existence of capital gains, and hence, the effective tax rates on buyback could not be ascertained.
In the amended tax regime, buyback consideration, minus, cost of acquisition, is taxed at flat rates of capital gains – 12.5%/ 20%, depending on whether the capital gains are long-term or short-term in nature.
The disincentives were two-fold:
Resultant market reaction: a sharp decrease in buyback offers during FY 24-25 as compared to previous financial years. As per the publicly available data in case of listed companies, the total buyback size for 2024-25 was ₹7,897 Crores when compared to 2023-24 with a buyback offer size of Rs. 49,836 crores, indicating a decrease of 84.2 per cent.
The number of buyback offers sharply declined, with only 17 instances of buyback offer by listed entities between 1st October 2024 till date (3rd February, 2026) as compared to about 36-40 instances in each of FY 22-23 and FY 23-24.
Pursuant to the Finance Bill, 2026, the buyback taxation appears to be rationalised in the following manner:
With this, while the tax incentive remains in the hands of the recipient shareholders, the tax treatment is rationalised in the form of value that is to be taxed and the manner in which tax is levied. However, the provision differentiates between a promoter and non-promoter shareholder.
In case of listed company
| Promoter | Promoter group |
| Person having control over the affairs of the company, or Named as promoter in annual return, prospectus etc. | Includes immediate relatives of promoters Entities in which >20% is held by promoters Entities that hold >20% in promoters etc. Persons identified as such under “shareholding of the promoter group” in relevant exchange filings |
The scope of “promoter group” thus, is much broader than “promoter”.
In case of an unlisted company
Question may arise on what does “indirect” shareholding mean? Does it include shareholding through relatives, or through other entities as well? The word “indirect” is not the same as “together with” or “persons acting in concert”. Indirect shareholding should usually mean shares held through controlled entities.
The amendments bring higher tax rates for promoters, in view of the distinct position and influence of promoters in corporate decision-making including in relation to buyback transactions. Promoters may want to influence buyback decisions for various reasons, for example:
In view of the promoter’s ability to influence buyback decisions to meet own objectives, additional tax is levied on buyback consideration received by the promoters, thus addressing any tax-arbitrage that could have been created through buybacks.
See our Quick Bytes on Budget, 2026 at here
Our other resources on buyback at here
– Finance Bill 2026 omits deemed dividend treatment on buyback consideration
– Payal Agarwal, Partner | corplaw@vinodkothari.com
Our quick bytes on Union Budget 2026 can be accessed here – https://vinodkothari.com/2026/02/quick-bytes-on-union-budget-2026/
The recent Finance Bill 2026 brings relief to investors in the form of changes in taxation for buyback consideration. With the omission of sub-clause (f) from Section 2(40) of the Income Tax Act, 2025 [dealing with deemed dividend], the position as it existed prior to 1st October, 2024, has been restored, except for additional tax rates in case of promoter shareholders.
| Particulars | Price per share | No. of shares | Amount (Rs.) |
| Total cost of acquisition | Rs. 50 | 100 | 5,000 |
| Shares tendered and accepted for buyback | Rs. 80 | 40 | 3,200 |
| Tax under old regime (effective 1st Oct, 2024) | Rs. 80 | 40 | 3,200 as dividend @ applicable tax slabs |
| Tax under new regime (effective 1st Apr, 2026) | Rs. (80-50) = Rs. 30 | 40 | 1,200 as capital gains @ short-term/ long-term capital gain rates |
See our other resources on buyback – https://vinodkothari.com/2024/08/resource-centre-on-buyback/
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Our Resources
Economic Survey 2025-26 highlights the position of climate finance in India and developing countries
Anushka Ganguly, Executive | corplaw@vinodkothari.com
The relevance of climate finance in climate action cannot be undermined, since climate change mitigation and adaptation require large-scale mobilisation of financial resources. The Economic Survey 2025-26, tabled in Parliament by Union Finance Minister Nirmala Sitharaman on January 29, 2026, highlights that the current climate finance levels are inadequate for developing countries to achieve their climate goals. This climate funding gap is not a lack of ambition, rather, is imbibed in the structural weaknesses of the international financial system.
By 2030, developing economies are estimated to need USD 5–6 trillion1 for effective climate action. With that in mind, the following may be noted:
1.1. Challenges in mobilising private capital for climate finance
In 2023, global financial assets under management totalled USD 1.9 trillion, with private capital accounting for nearly USD 1.3 trillion3. Most of this private capital went to advanced economies, with China receiving another 30%, whereas other developing countries, excluding China, received merely around 15%. The reasons for such a gap include:
While the overall progress of the country towards the climate goals remain insufficient4, India has, over years, through policy initiatives and regulatory reforms, have mobilised climate finance to the extent that has resulted in a 36% reduction in emissions intensity since 2005 and achieved 50% non-fossil power capacity ahead of schedule. The policy initiatives taken include the following:
2.1. Bridging the gap domestically
Currently, around 83 per cent of India’s finance for mitigation and 98 per cent of finance for adaptation is sourced domestically, reflecting strong internal financing. While relying solely on domestic resources is insufficient to meet India’s overall climate investment needs, some steps towards strengthening the domestic financial system may include:
Conclusion
There is a wide disparity between the climate vulnerability and the funds available towards supporting the climate action. While policy incentives are being shaped towards mobilising domestic finance, an effective global response is required, particularly towards the developing countries. The global capital allocation needs to be mobilised towards areas where the investment needs for sustainable development are most pressing.
See our other resources:
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