SEBI Proposes Reintroducing Open Market Share Buybacks Via Stock Exchanges

Nearly a year after scrapping the route over concerns of unfairness and tax disparity, the Securities and Exchange Board of India has proposed to reintroduce open market buy-backs of shares through stock exchanges, citing changes in the taxation framework that remove earlier disparities.

In a consultation paper issued on April 2, 2026, the regulator has invited public comments on bringing back the method as an additional route under the SEBI (Buy-Back of Securities) Regulations, 2018.

“The objective of this consultation paper is to seek comments/ views / suggestions from the public and other stakeholders on the proposal to re- introduce open market buy- back of shares or other specified securities through stock exchange as an additional method,” it said.

SEBI noted that buy-backs are governed by Section 68 of the Companies Act, 2013 read with the Companies (Share Capital and Debentures) Rules, 2014, which allow companies to purchase their own shares subject to prescribed conditions and limits.

The open market route through stock exchanges had been discontinued with effect from April 1, 2025, after concerns emerged over equitable treatment of shareholders and taxation under the earlier regime.

Under the earlier mechanism, buy-back orders could be matched with only a few shareholders due to the price-time order matching system, leaving others without an opportunity to participate, thereby making the process inequitable.

SEBI also flagged taxation issues. Previously, companies paid buy-back tax while shareholders were exempt, meaning only those shareholders who were able to participate could realise tax-free gains, while others were excluded, resulting in inequitable outcomes.

The regulator said the taxation framework has since undergone a change. Under the new regime, buy-back proceeds will be taxed as capital gains in the hands of shareholders, removing the earlier disparity.

“Consequently, the differential tax advantage that existed earlier between shareholders who were able to participate in the buy- back and those who were not, would not exist any longer,” it said.

In light of these changes, SEBI has proposed re-introducing the open market buy-back route through stock exchanges, subject to appropriate regulatory provisions and compliance mechanisms.

The proposal envisages execution through a separate buy-back window on stock exchanges.

Public comments on the proposal have been invited till April 23, 2026.