SEBI Proposes to Allow Companies to Buy Back Shares from Open Mark

New Delhi, April 3 — The market regulator SEBI has proposed to allow companies to repurchase shares through open market purchases on stock exchanges again, following changes in the tax framework. The Securities and Exchange Board of India (SEBI) stated in its consultation paper that reinstating this method of buyback will provide companies with an additional option for repurchase. It will also ensure equal opportunities and a different method of taxation for public shareholders. The buyback of shares through stock exchanges was halted on April 1, 2025, due to concerns that the 'price-time matching system' allowed some investors to capture a significant portion of the buyback while leaving other interested investors excluded.

Additionally, there were tax-related disparities among shareholders under the old tax framework. However, SEBI noted that these concerns have largely been addressed following changes in the tax framework under the Finance Act 2026. Starting April 1, 2026, the tax on the buyback amount will be levied on shareholders as capital gains rather than on companies.

SEBI stated that this will eliminate the tax disparity between participating and non-participating investors in buybacks. The regulator also mentioned that the open market buyback method is widely used in global markets and enhances value-seeking, liquidity, and capital allocation efficiency. Industry organizations like FICCI and the Association of Investment Bankers of India (AIBI) have supported this proposal, stating it will help reduce selling pressure in the market and boost investor confidence. Under this proposal, a separate 'window' may be provided for buybacks through stock exchanges. SEBI has invited public comments on this by April 23.