India proposes reintroducing open-market share buybacks via exchanges

India’s markets regulator on Thursday proposed reintroducing share buybacks through the open market via stock exchanges, a year after the route was discontinued.

The Securities and Exchange Board of India (SEBI) noted that recent changes to the taxation regime have addressed inequitable concerns as buyback proceeds are now taxed as capital gains in the hands of shareholders.

The regulator said this ensures that shareholders are taxed similarly whether they sell shares in a buyback or through regular market trades.

SEBI also said open-market buybacks enable companies to absorb selling pressure gradually, support price discovery and enhance liquidity.

SEBI has proposed reintroducing the method with appropriate safeguards, including restrictions on placement of bids, price and volume.

SEBI proposed that companies can buy back only up to 25% of the average daily traded value, place orders only during regular trading hours and keep prices within a 1% band on either side of the last traded price.

The Securities and Exchange Board of India (SEBI) had discontinued buy-back through the open market via stock exchanges route in April 2025 after flagging concerns over unequal participation among shareholders.

SEBI had said the stock exchange route buyback allowed the possibility of a few investors selling large quantities while others were left out despite willingness to participate.

The regulator had also flagged the earlier tax framework as inequitable, as shareholders who participated in buybacks paid no tax on gains while others had to sell in the market and incur capital gains tax.

The regulator has sought public comments on the proposals by April 23.