Following Vaidya's retirement, he took up residence in Pune, India, where he built a three-bedroom bungalow for his retirement. Just six months later, on 10 August 1986, he was shot to death in his white Maruti 800, bearing Registration No. DIB 1437, while driving home from the market on Rajendrasinhji Marg, at around 11:45 a.m. According to police, four reportedly clean-shaven men pulled up alongside the car on motorcycles, with the lead assassin firing three shots into Vaidya through the driver's-side window; the first two bullets penetrated his brain and killed him instantly. His car steered towards a cyclist named Digamber Gaikwad, and the cycle was crushed, though the cyclist escaped unharmed, the general's car stopping in front of a compound wall. A third bullet struck Vaidya in the shoulder, with another striking his wife Bhanumati in the neck. His bodyguard, who was also in the car, was wounded by four bullets in his back and thighs. The bleeding general was carried to the Command Hospital in a passing green matador van, and was declared brought dead. The witnesses who deposed in court said that the assailants were clean shaven, but later in turban and beard in court.