Sebi panel proposes shareholder pay buyback tax: Check details here

The system of taxing buybacks in the hands of companies unfairly burdens shareholders that choose not to tender their shares, a panel of the Securities and Exchange Board of India (Sebi) said in a report.

Tax should be levied only on those shareholders who opt for the plan, it said. The panel also proposed changes in size, time period and use of funds earmarked for open market buybacks. There was also a suggestion to revise mechanism for open market buybacks via book-building. 

The sweeping proposals are part of a consultation paper floated by Sebi on which comments from the stakeholders have been sought till December 1. The consultation paper was released on Wednesday.

A glide path has been proposed with respect to the reduction in the maximum limit and the time period for a buyback offer through the open market under the stock exchange mechanism.

According to Sebi, the time period for the buyback process can be reduced to 66 working days starting from April 2023 and further cut it down to 22 working days from April 2024. Finally, the open market option can be closed down for buyback offers from April 2025.