Open Market Share Buyback: SEBI has proposed to reintroduce the previous mechanism for share buyback. The regulator has said that it is proposing the reintroduction of share buybacks, as an additional method, from the open market through stock exchanges.
This has come from the SEBI after the recent changes in the share buyback taxation rule.
Tax On Share Buyback
Starting April 1, 2026, a flat 12 per cent surcharge is applicable on capital gains earned by selling shares in the buyback offer.
At present, companies are allowed to announce share buybacks through a tender offer route.
SEBI had discontinued the open market share buyback method from April 1, 2025. At that time, the decision was taken amid concerns regarding the equitable treatment of shareholders and implications arising from the then-prevailing taxation framework.
"The reintroduction of this method of buy-back would provide companies with an additional mechanism for undertaking buy-back, while ensuring equitable opportunity and treatment of taxation for public shareholders," SEBI said in its consultation paper.
Open Market Share Buyback
Under the open market share buyback, companies are allowed to repurchase shares via exchanges.
As per SEBI, buybacks through stock exchanges had resulted in a situation wherein shareholders willing to participate in the buyback were left out due to the price-time matching mechanism. Also, the then-prevailing taxation structure led to unequal outcomes among shareholders.
However, SEBI said that the new tax on buybacks, effective from April 1, 2026, has addressed these concerns.
Under the SEBI's pen market share shre buyback proposal, buybacks through stock exchanges may be carried out via a separate window, as provided earlier.
SEBI has sought public comments till April 23 on the proposal.
