As a big move market regulator Securities and Exchange Board of India (SEBI) has proposed reintroducing open market share buybacks through stock exchanges, marking a significant shift in capital market regulation following recent tax reforms.

In a consultation paper released on Thursday, SEBI suggested that companies should once again be allowed to repurchase their shares directly from the secondary market as an additional method under existing buyback regulations. The mechanism, previously discontinued due to tax-related concerns, is now being reconsidered after changes in the taxation framework addressed earlier inequities.


SEBI paper stated, " shifting of tax burden from the Company undertaking buy-back to the public shareholders participating in buy-back, has made selling in normal market equal to selling in buy-back through stock exchange. Further, the open market buy-back method through stock exchange is also a widely adopted method in international jurisdictions which facilitates continuous price discovery and enhances liquidity".

SEBI paper further stated, "Accordingly, buy-back of shares or specified securities from open market through stock exchange may be re-introduced, subject to appropriate regulatory provisions and compliance mechanism. The re-introduction 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 noted that under the revised provisions of the Income Tax Act, buyback proceeds will be taxed as capital gains in the hands of shareholders. This aligns the tax treatment of buybacks with regular market transactions, eliminating the disparity that previously existed between shareholders who participated in buybacks and those who did not.

The proposed move follows representations from industry bodies such as the Federation of Indian Chambers of Commerce and Industry and the Association of Investment Bankers of India. These organizations have argued that open market buybacks are globally preferred due to their efficiency and ability to stabilize markets.

Merchant banker body AIBI also advocated for this, AIBI said, reinstating this method would allow companies to absorb selling pressure gradually, prevent panic-driven declines, and enhance investor confidence. It also enables firms to deploy surplus cash effectively while potentially boosting earnings per share through share reduction.

SEBI emphasized that open market buybacks operate within an order-driven system, ensuring transparency through price-time matching and providing equal opportunity to all public shareholders.

SEBI has saught public comments on the proposal by April 23, 2026.