Consultation paper dated 02.04.2026
The Securities and Exchange Board of India (SEBI) has issued a consultation paper inviting comments from the public and stakeholders on a proposal to reintroduce buy-back of shares through the open market via stock exchange as an additional method under the SEBI (Buy-Back of Securities) Regulations, 2018.
1. Background – Discontinuation of Open Market Method
The open market buy-back method was discontinued with effect from 1st April 2025 due to:
- Concerns over equitable treatment of shareholders
- Issues arising from the then-prevailing taxation framework, which created disparities
2. Change in Taxation Framework
Subsequent changes in tax laws have addressed earlier concerns:
- Buy-back proceeds are now taxed as capital gains in the hands of shareholders
- This removes the tax arbitrage and inequity issues that existed earlier
3. Rationale for Reintroduction
Stakeholders have represented that the open market route:
- Enhances market efficiency
- Improves liquidity
- Facilitates better price discovery
Considering these benefits, SEBI has proposed to reintroduce this method.
4. Proposed Mechanism
- Buy-back through open market will be conducted via a separate window on stock exchanges
- It will be subject to existing regulatory safeguards and provisions under the Buy-Back Regulations
5. Call for Public Comments
SEBI has invited comments and feedback from stakeholders on the proposal, indicating a consultative approach before finalising the regulatory framework.
6. Conclusion
The proposal reflects SEBI’s intent to balance investor protection with market efficiency, by reconsidering the open market buy-back route in light of the evolved taxation regime and stakeholder feedback.
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