The securities and exchange board of India (SEBI) has proposed reintroducing open market share buybacks through stock exchanges, after recent changes in the taxation framework removed a key concern behind the earlier discontinuation of the route.

In a consultation paper issued on Thursday, April 2, the regulator said the shift to capital gains taxation for buyback proceeds has addressed issues of tax inequity among shareholders.

Tax change removes key concern

Under the revised tax framework from April 1, 2026, buyback proceeds are taxed as capital gains in the hands of shareholders, aligning them with market transactions.

SEBI said this removes the earlier disparity where only shareholders whose shares were accepted in buybacks benefited from favourable tax treatment, while others were left out.

Buybacks through the stock exchange route were discontinued from April 1, 2025, following concerns over equitable treatment of shareholders and tax-related distortions.

The regulator had noted that participation in such buybacks depended on order matching, leading to uneven opportunities for investors.

Proposal to bring back route

SEBI has now proposed reintroducing the method as an additional option under the existing buyback framework, alongside tender offer and book-building routes.

The buybacks would be carried out through a separate window on stock exchanges, as provided under the regulations.

Industry support for revival

Industry bodies, including FICCI and the Association of Investment Bankers of India, have supported the move, saying the mechanism helps companies absorb selling pressure, improve liquidity and enable efficient capital deployment. They also said the method is widely used in global markets and supports better price discovery.

SEBI has sought public comments on the proposal till April 23.