SEBI Proposes Re-introduction of Open Market Buy-Backs Through Stock Exchanges
The Securities and Exchange Board of India (SEBI) is seeking public comments on a proposal to re-introduce open market buy-backs of shares or other specified securities through stock exchanges. This move follows a period where this method was discontinued and comes amid changes to the taxation framework for buy-backs.Previously, the open market method for buy-back was discontinued effective April 1, 2025, due to concerns regarding equitable treatment of shareholders and the prevailing taxation framework. Under the prior method, there were concerns that the entire purchase order of a company could be matched with the sale order placed by one or a few shareholders, potentially depriving other shareholders of the opportunity to participate. Additionally, the previous tax structure created inequities for shareholders.
| Parameter | Till March 31, 2023 | w.e.f. April 01, 2023 | w.e.f. April 01, 2024 | w.e.f. April 01, 2025 |
|---|---|---|---|---|
| Maximum limit | 15% | 10% | 5% | 0 |
| Time period for completion | 6 months | 66 working days | 22 working days | NA |
Significant changes in the taxation framework, effective from October 1, 2024, initially treated buy-back consideration as “deemed dividend” taxed at applicable rates for shareholders. However, the Income Tax Act, as amended by the Finance Act 2026, effective April 1, 2026, now taxes buy-back consideration under the “Capital Gains” head for shareholders. Promoter shareholders face a surcharge of 12% on additional tax.
Industry associations, including the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Association of Investment Bankers of India (AIBI), have requested the reinstatement of this buy-back method. FICCI emphasized its efficiency and international preference, while AIBI highlighted its ability to absorb selling pressure and boost earnings per share.
SEBI’s proposal aims to re-introduce the open market buy-back method, subject to appropriate regulatory provisions and compliance mechanisms, recognizing that the tax structure no longer presents the previous inequities. The buy-backs would be undertaken through a separate window on the stock exchanges.
Public comments are being accepted through April 23, 2026, via a link on the SEBI website.
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