SEBI brings back open-market share buybacks from August 1 — what it means for your portfolio

The Securities and Exchange Board of India (SEBI) has notified amendments to the SEBI (Buy-Back of Securities) Regulations, 2018, restoring the open-market route for share buybacks through stock exchanges, effective 1 August 2026. This route had been phased out completely by April 2025 over concerns about unequal shareholder participation and tax distortions.

What changed

• Buyback size cap: An open-market buyback via stock exchanges must remain below 15% of a company’s paid-up capital and free reserves, based on both standalone and consolidated financials.
• Faster timelines: The buyback must be completed within 66 working days from the offer opening — far shorter than the up-to-six-month window that existed under the earlier framework.
• Merchant banker now optional: Companies can skip appointing a merchant banker, provided designated entities carry out those responsibilities instead.
• Promoter shares frozen: Promoter and associate holdings in the company get frozen at the ISIN level for the duration of the buyback, to curb misuse.

Why the tax objection went away

SEBI’s original worry was that shareholders who tendered shares in a buyback got a tax advantage over those who simply sold in the open market. The Finance Act, 2026 addressed this by taxing buyback proceeds as capital gains in shareholders’ hands — broadly the same as a normal market sale — instead of the earlier deemed-dividend-style treatment. Reports indicate this puts long-term gains at 12.5% and short-term gains at 20%, in line with standard capital-gains tax rates, with an additional tax component introduced for promoter shareholders. With that gap closed, SEBI concluded the case for keeping the exchange route shut had “largely been addressed.”

What it means for retail investors

• More frequent buyback opportunities: Expect more companies — especially IT and cash-rich firms — to use the quicker, cheaper exchange route rather than the slower tender-offer process.
• Tax now matters like a normal sale: Since buyback consideration is taxed as capital gains, your holding period (long-term vs short-term) will determine the rate you pay, just as it would on any other share sale.
• Watch the 15% cap and 66-day window: Because open-market buybacks are capped in size and time-bound, price impact on the stock can be sharper and faster than under the old, slower framework.

If you hold shares in a company that announces an open-market buyback after 1 August, track the offer price relative to the market price, and factor in capital-gains tax on the actual gain rather than the full consideration before deciding whether to participate.

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Source: Moneylife — SEBI Restores Open-Market Share Buybacks via Stock Exchanges from 1 August 2026; Upstox — SEBI reintroduces open market share buyback via exchanges from Aug 1.