SEBI buyback rules 2026: Open-market route from Aug 1

SEBI clears return of open-market buybacks

The Securities and Exchange Board of India (SEBI) has approved the reintroduction of open-market share buybacks through stock exchanges, with the framework set to start from August 1, 2026. The route had been phased out and discontinued from April 1, 2025, amid concerns around investor fairness and the then-prevailing tax regime. With the reopening, listed companies will again be able to repurchase shares directly on the exchange, alongside the tender offer route and the open-market route through book building. SEBI has positioned the change as a way to provide an additional buyback mechanism while ensuring equitable opportunity and consistent tax treatment for public shareholders. The board’s decision was part of a wider set of approvals covering mutual funds, alternative investment funds (AIFs), securities transmission, and commodity derivatives.

What changed since the route was discontinued

SEBI’s earlier decision to close exchange-based open-market buybacks was linked to taxation-related inequities and fairness concerns for shareholders. In the intervening period, the tax treatment of buybacks has been amended. The article notes that buyback proceeds are now taxed as capital gains in shareholders’ hands, similar to a normal market sale, starting from April 2026. This alignment is one of the key reasons cited for SEBI bringing the exchange route back. The regulator’s updated framework is designed to reduce the earlier disparities and standardise how investors are taxed when shares are bought back through the market.

Effective date and key operating conditions

SEBI has set August 1, 2026 as the start date for exchange-based open-market buybacks. Buybacks through stock exchanges will need to be completed within 66 working days from the opening date. In addition, at least 40% of the earmarked funds must be utilised during the first half of the buyback period. In practical terms, the first half corresponds to 33 working days, given the 66-working-day overall window.

These conditions compress the execution timeline compared with the earlier system described as “six months” in the article. The shorter window and the minimum utilisation requirement are meant to reduce uncertainty for the market, and to limit the risk of buybacks being announced but executed slowly.

How buybacks work today: the available routes

SEBI’s framework continues to recognise multiple buyback routes for listed companies. At present, buybacks can be undertaken through:

• The tender offer route
• The open-market route through book building

With the August 2026 change, companies will also regain the ability to conduct open-market buybacks through stock exchanges. This brings back a route that allows purchases to happen through regular on-exchange transactions, subject to SEBI’s execution and disclosure requirements.

Promoter participation and trading-screen disclosure

SEBI has reiterated that promoters are not allowed to participate in open-market buybacks. Since exchange-based open-market buybacks will be treated as normal trading transactions, SEBI said the requirement of a separate trading window is being dispensed with. The regulator also said that the display of the company’s identity as purchaser on the trading screen will not be required.

These changes are positioned as part of the operational design of the reopened route, reflecting its “normal trading” treatment on the exchange while keeping restrictions on promoter participation intact.

Merchant banker appointment becomes optional

Another notable feature mentioned in the article is that hiring merchant bankers for buyback transactions will be optional. Where a company chooses to appoint an intermediary, SEBI’s framework allows the role to be handled by identified “competent officers” or entities referenced in the report, including the company’s compliance officer and auditors, as well as stock exchanges.

This is a material procedural shift from frameworks where a merchant banker is mandatory, and it can reduce process friction for companies, provided the responsibility framework remains clear.

What else SEBI’s board approved alongside buybacks

SEBI’s board meeting also approved a set of other measures reported by PTI. These include:

• Relaxation of intra-day borrowing norms for mutual funds.
• A faster fundraising mechanism for AIFs through a green-channel framework called GARUDA.
• Simplification of securities transmission after an investor’s death.
• Measures aimed at reviving agricultural commodity derivatives trading.
• Alignment of norms for securitised debt instruments with the Reserve Bank of India’s securitisation framework.

Among these, GARUDA is designed to speed up AIF fundraising timelines for eligible funds. Under the framework, eligible AIFs can start fundraising within 10 working days of filing placement memorandums, compared with the current 30-day waiting period.

Timeline: why 2026 marks a turning point

The exchange-based open-market buyback route was phased out and later discontinued from April 1, 2025. The current decision revives it effective August 1, 2026, after taxation changes that, as described in the article, removed earlier inequities by shifting buyback taxation to shareholders in a manner consistent with normal capital gains treatment.

The article also references SEBI consultation papers dated April 2, 2026 and May 8, 2026 proposing the reintroduction of the mechanism. Public comments on the consultation paper were invited until May 29, 2026, indicating the regulator followed a consultative process before the board approval.

Key data at a glance

Market impact: what changes for investors and issuers

For companies, the reopened exchange route adds flexibility in executing buybacks, because purchases can be routed through the exchange rather than only through tender offers or book-built buybacks. SEBI’s 66-working-day completion requirement, along with the 40% early utilisation condition, sets a clear execution schedule that investors can monitor.

For shareholders, the key change highlighted is taxation alignment. With buyback proceeds taxed as capital gains similar to a normal market sale, the framework aims to reduce disparities that previously raised fairness concerns. The restrictions on promoter participation remain relevant for market confidence, as does the regulator’s approach to treating the transactions as normal trading without additional trading-window mechanics.

Analysis: why SEBI’s safeguards matter

SEBI’s decision is not presented as a full reset of the buyback regime but as a reinstatement of an earlier allowed method with tighter operational conditions. The shorter execution window and the mandatory early utilisation requirement are designed to prevent prolonged buyback programs that can leave markets guessing about the pace of purchases.

Separately, making merchant banker appointment optional signals an attempt to streamline processes, while still requiring companies to assign responsibility to appropriate officers and entities. Taken together, the changes indicate that SEBI wants the exchange route back, but with clearer execution discipline and fewer structural reasons for unequal shareholder outcomes.

Conclusion

SEBI’s approval brings open-market buybacks via stock exchanges back into India’s buyback toolkit from August 1, 2026, after the route was discontinued from April 1, 2025. The framework sets a 66-working-day completion timeline and requires 40% of funds to be deployed in the first half, alongside continued limits on promoter participation. Beyond buybacks, SEBI also cleared steps to ease intra-day borrowing rules for mutual funds and accelerate AIF fundraising through the GARUDA green channel. The updated buyback route will now move into implementation, with companies able to plan programs under the August 2026 start date and the new execution conditions.