- SEBI proposes reintroducing open market share buybacks via stock exchanges from April 2025
- Buyback proceeds taxed as capital gains from April 1, 2026, removing prior tax advantages
- Industry bodies support open market buybacks for liquidity, confidence, and gradual cash deployment
SEBI has proposed re‑introducing open market share buybacks through stock exchanges, citing changes in the tax framework and sustained demand from industry bodies.
The market regulator has released a consultation paper seeking public comments on allowing listed companies to buy back shares directly from the stock market, a route that was completely discontinued from April 1, 2025.
Open market buybacks were earlier phased out over concerns around unequal treatment of shareholders and tax distortions. Under the earlier regime, companies paid a buyback tax while shareholders paid none, allowing some investors to exit tax‑free while others missed out.
SEBI now says those concerns have been addressed after changes in buyback taxation. From April 1, 2026, buyback proceeds are taxed as capital gains in the hands of shareholders, similar to a normal market sale. As a result, selling shares in a buyback no longer carries a tax advantage over selling in the open market.
ALSO READ: Govt Introduces Flat 12% Surcharge On Buyback Gains For Individuals
Industry bodies have been pushing for the return of the exchange‑based buyback route. The Federation of Indian Chambers of Commerce and Industry has said open market buybacks are an efficient and globally preferred mechanism. The Association of Investment Bankers of India has argued that steady buying from the market helps absorb selling pressure, prevents panic selling and restores confidence among retail investors, especially during volatile phases.
SEBI noted that open market buybacks allow companies to deploy surplus cash gradually and benefit long‑term shareholders through share cancellation, which can improve earnings per share. The regulator also pointed out that this route supports continuous price discovery and enhances liquidity.
If re‑introduced, open market buybacks would be allowed only through a separate stock exchange window, with strict safeguards. Promoters and persons in control will not be permitted to sell shares into such buybacks. Limits on price, volume, timing of orders, daily disclosures and escrow requirements will continue to apply.
SEBI has invited public comments on the proposal till April 23.
ALSO READ: Buyback Taxation Changes: Wipro Seen To Move First Among IT Majors After April 1
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
