Form 3CD Clause 36B for AY 2026-27: Buyback Reporting & Section 2(22)(f)

Form 3CD Clause 36B for AY 2026-27 is the new tax-audit disclosure for amounts received by an assessee on buy-back of shares covered by section 2(22)(f) of the Income-tax Act, 1961. For FY 2025-26, this matters because the shareholder-level buyback tax regime applies to qualifying domestic-company buy-backs taking place on or after 1 October 2024. The amount received is treated as dividend income, while section 46A separately deems the buyback consideration to be nil for capital-gains computation, generally creating a capital loss equal to the shareholder's cost, subject to the Act.

Update — 28 September 2026: CBDT changed the specified ordinary AY 2026–27 tax-audit report deadline from 30 September to 21 October 2026 and the related audited return deadline from 31 October to 21 November 2026. Section 92E / Form 3CEB cases follow a separate timetable. Official Income Tax Department announcement.

Form 3CD Clause 36B for AY 2026-27: direct answer

Clause 36B was inserted into Form 3CD by CBDT Notification No. 23/2025 dated 28 March 2025, effective from 1 April 2025. The clause asks whether the assessee has received any amount for buy-back of shares as referred to in section 2(22)(f) and, if yes, the amount received. It is therefore a shareholder-side tax-audit disclosure. It should be reconciled with dividend income, capital-loss computation, demat/broker records, bank receipts, company communications and the income-tax return for AY 2026-27.

Why Clause 36B was added to Form 3CD

The disclosure follows a fundamental change introduced by the Finance (No. 2) Act, 2024. Before 1 October 2024, domestic-company buy-backs were generally taxed through section 115QA at the company level and the shareholder-side exemption framework applied. For qualifying buy-backs from 1 October 2024, that company-level regime ceased to apply and the receipt moved to the shareholder's tax computation as deemed dividend under section 2(22)(f).

Because the tax incidence moved to the shareholder, the tax-audit report also needed a direct disclosure that would help reconcile the buyback receipt with the return of income. Clause 36B serves that function.

Section 2(22)(f): when a buyback receipt becomes dividend

Section 2(22)(f) covers amounts distributed by a company on purchase of its own shares from a shareholder in accordance with section 68 of the Companies Act, 2013. For the post-1 October 2024 regime, the amount received by the shareholder is treated as dividend. This is important because the tax result is no longer determined only by the economic gain over the cost of the shares.

For tax-audit purposes, finance teams should identify every qualifying domestic-company buyback receipt recorded during FY 2025-26 and test whether it falls within section 2(22)(f). The gross amount received should then be reconciled to the amount disclosed in Clause 36B.

Section 46A: why the same transaction can also create a capital loss

The shareholder-level regime has a second limb. Section 46A now provides that where consideration of the nature referred to in section 2(22)(f) is received for a buy-back on or after 1 October 2024, the value of consideration for capital-gains computation is deemed to be nil. The shareholder's cost of acquisition therefore does not reduce the deemed-dividend amount. Instead, subject to the normal capital-gains provisions, the nil-consideration mechanism generally produces a capital loss equal to the relevant cost of acquisition.

This means one buyback can produce two different tax-reporting consequences: a dividend inclusion based on the amount received and a separate capital-loss computation using nil consideration. The two should not be netted casually in the tax-audit working papers.

Worked example: Clause 36B and buyback tax reporting

Assume an Indian company buys back shares from a shareholder during FY 2025-26 for ₹12,00,000. The shareholder's tax cost in those shares is ₹7,50,000. If section 2(22)(f) applies, the ₹12,00,000 received is treated as dividend income. For section 46A capital-gains computation, the consideration is deemed nil, so the shareholder would generally compute a capital loss of ₹7,50,000, subject to the applicable capital-gains rules and the exact facts.

For Clause 36B, the tax auditor should focus on the amount received on the qualifying buyback—₹12,00,000 in this example—and then reconcile the related dividend and capital-loss reporting in the return and supporting schedules.

What should be reported in Clause 36B?

• Whether the assessee received any amount during the relevant year from a buy-back covered by section 2(22)(f).

• The amount received on such qualifying buy-back transactions.

• A clear reconciliation to bank receipts, broker/demat statements, company buyback documents and ledger entries.

• Consistency with dividend income offered in the return and the separate section 46A capital-loss computation.

• Transaction-level support where the assessee participated in more than one buyback during FY 2025-26.

Who should pay particular attention to Clause 36B?

Clause 36B is relevant wherever the tax-audit assessee is itself a shareholder that received a qualifying buyback amount. This can include companies, firms, LLPs and other assessees subject to section 44AB that hold investments or treasury positions in domestic companies. It is not limited to entities whose principal business is investment.

The risk is easy to miss because buyback entries may be routed through an investment ledger, broker statement or capital account rather than an ordinary revenue ledger. A P&L-only scan can therefore miss the transaction.

Clause 36B reconciliation checklist for AY 2026-27

• Extract all corporate-action and buyback entries from demat, broker and custodian records for FY 2025-26.

• Identify the buyback date and confirm whether the post-1 October 2024 shareholder-tax regime applies.

• Verify that the payer is the company buying back its own shares and that the transaction falls within section 2(22)(f).

• Reconcile gross buyback proceeds with bank credits and accounting entries.

• Map the gross receipt to dividend reporting in the income-tax computation and return.

• Compute the section 46A capital result separately using the statutory nil-consideration rule where applicable.

• Trace the correct tax cost and lot identification for shares bought back, particularly where multiple acquisition dates or bonus/split events exist.

• Review whether capital losses are classified, set off and carried forward under the applicable provisions rather than simply reducing the dividend receipt.

• Retain the company buyback offer, acceptance/allotment confirmation, demat debit, broker statement, bank receipt and tax working papers.

• Ensure Clause 36B agrees with the final tax computation and return before the tax-audit report is uploaded.

Common mistakes in buyback reporting under Form 3CD Clause 36B

The first mistake is using the old pre-October-2024 buyback logic for a FY 2025-26 transaction. The second is reporting only the economic profit as dividend rather than analysing the gross amount under section 2(22)(f). The third is netting the capital loss against the deemed dividend in the audit working without separately recognising the two statutory computations.

Another frequent weakness is relying only on the general ledger. Investment transactions often sit outside routine sales and expense testing. The audit file should therefore include demat, custodian and bank-level scans designed specifically to identify corporate actions.

AY 2026-27 transition: old Act forms still apply

Although the Income Tax Act, 2025 came into force from 1 April 2026, FY 2025-26 remains AY 2026-27 under the Income-tax Act, 1961. The Income Tax Department has expressly confirmed that tax-audit reports for FY 2025-26 continue to be filed in Form 3CA/3CB with Form 3CD under the 1961 Act. For ordinary tax-audit cases, CBDT changed the related ITR due date from 31 October to 21 November 2026 and the tax-audit report due date from 30 September to 21 October 2026.

FAQs on Form 3CD Clause 36B for AY 2026-27

Is Clause 36B new for AY 2026-27?

Yes. CBDT Notification No. 23/2025 amended Form 3CD with effect from 1 April 2025 and inserted Clause 36B to capture qualifying buyback receipts covered by section 2(22)(f).

Does Clause 36B report the capital loss on buyback?

Clause 36B specifically focuses on whether an amount was received on the qualifying buyback and the amount received. The related section 46A capital-loss computation should be separately reconciled in the tax computation and return.

Is the buyback amount taxed only to the extent it exceeds cost?

Under the post-1 October 2024 framework for qualifying domestic-company buybacks, the amount received is deemed dividend under section 2(22)(f), while cost is dealt with separately through the section 46A capital-gains mechanism where consideration is deemed nil. It is therefore not simply a conventional sale-proceeds-minus-cost computation.

What records should a tax auditor ask for?

At minimum: buyback offer and acceptance documents, demat/custodian statement, broker statement where relevant, bank receipt, acquisition-cost working, corporate-action records and the tax computation showing dividend and capital-loss treatment.

Practical takeaway

Form 3CD Clause 36B is short, but the underlying tax mechanics are not. For AY 2026-27, the safest approach is a transaction-level reconciliation that separately tracks the gross buyback receipt under section 2(22)(f) and the capital-loss computation under section 46A. Finance teams should not wait until the final Form 3CD review to discover buybacks hidden in investment or demat records.

Related PGT & Associates resources

Tax Audit AY 2026-27 hub: https://www.pgtandassociates.com/post/tax-audit-ay-2026-27-forms-deadline

Changes in Tax Audit Report for AY 2026-27: https://www.pgtandassociates.com/post/tax-audit-report-changes-ay-2026-27

Tax Audit Clauses for AY 2026-27: https://www.pgtandassociates.com/post/tax-audit-clauses-ay-2026-27

Primary sources

CBDT Notification No. 23/2025 (Form 3CD amendments): https://www.incometaxindia.gov.in/w/notification-no.-23/2025-f.-no.-370142/10/2025-tpl-/-gsr-207-e-income-tax-eighth-amendment-rules-2025

Income Tax Department — Section 46A: https://wmstatic-prd.incometaxindia.gov.in/web/guest/w/section-46a-25

Income Tax Department — Capital Gains on Buy-Back of Shares: https://wmstatic-prd.incometaxindia.gov.in/web/guest/w/capital-gain

Income Tax Department — AY 2026-27 transition FAQs: https://www.incometax.gov.in/iec/foportal/node/11724

Disclaimer

This article is for general professional information and does not constitute legal, tax or investment advice. Buyback taxation can depend on the nature of the company, security, shareholder and transaction. Obtain transaction-specific advice before filing or taking a tax position.

PGT & Associates assists businesses and professional teams with tax-audit reconciliations, Form 3CD review and transaction-level tax reporting. For a specific buyback or AY 2026-27 tax-audit issue, discuss the underlying documents and facts with an appropriate professional adviser.