While there is no confirmation yet, it is expected that the finance ministry and SEBI are weighing the possibility of reducing the tax burden on investors. They are considering temporary removal of tax on share buybacks and on long-term capital gains (LTCG).

Whether it will be only for a period of 3 months or a permanent removal is not known. This could be part of an ongoing exercise to give relief and exemptions to investors amid the turmoil caused by the market meltdown.

In the last few days, investors have already swamped the government and the regulator with such demands as the fiscal year end is also approaching. Analysts are of the view that the removal of buyback tax will prompt more firms to announce buybacks and that could provide a base for stock prices. Of course, the government may also have to look at the revenue forgone if buyback tax is removed. The scrapping of the buyback tax will be an incentive for cash-rich companies to reward shareholders with sharing of cash flows.