Time for a relook at tax on buybacks to boost shareholder returns

The legal and regulatory framework governing buybacks is primarily under the Companies Act, 2013, and the Sebi Buyback of Securities Regulations, introduced in 1998 and updated in 2018 and 2023

Globally, share buybacks are an extremely popular mechanism for companies to return capital to shareholders, rightsize their balance sheets, and signal confidence in their financial health. For example, Apple has done buybacks worth $430 billion over the last five years, boosting its share price. However, like every other aspect of economic activity in India, the only policy objective of the state has been to extract as much money as possible by taxing buybacks, leaving companies lukewarm to the idea and depriving shareholders in the process. This becomes immediately apparent in a bear market, when the stock prices of outstanding companies