Economy & Banking★ Must Know

SEBI Reintroduces Open Market Share Buybacks Through Stock Exchanges From August 1

By TestNeeti Editorial TeamPublished Tuesday, 7 July 2026 3 min readSource: The Hindu - IndustryArticle 1 of 21

Markets regulator Securities and Exchange Board of India (SEBI) has notified rules to reintroduce share buybacks through stock exchanges, allowing companies to repurchase their own shares in the open market from August 1, 2026, while capping the execution period at 66 working days. As per the notification dated July 1, open-market buybacks must be less than 15% of the paid-up capital and free reserves on both standalone and consolidated statements. SEBI had phased out open-market buybacks in 2025, citing uneven treatment of shareholders and tax-related distortions. Under the new framework, appointing a merchant banker becomes discretionary, promoter shares are frozen at ISIN level during the buyback, and public shareholders are taxed on their actual capital gains when tendering shares.

Key Facts & Details

10 points

1
SEBI has notified rules allowing companies to carry out open market share buybacks through stock exchanges from August 1, 2026, without a dedicated buyback window.
2
Open market buybacks must be less than 15% of the paid-up capital and free reserves of the company on both standalone and consolidated financial statements.
3
The buyback offer must open within four working days of the public announcement and close within 66 working days of opening, replacing the earlier framework that allowed up to six months.
4
SEBI had phased out open-market buybacks in 2025, citing concerns over uneven treatment of shareholders and tax-related distortions.
5
Appointing a merchant banker is now discretionary; if none is appointed, its tasks pass to the company, compliance officer, statutory auditor, secretarial auditor and stock exchanges.
6
Shares held by promoters or their associates will remain frozen at ISIN level during the buyback period, and companies cannot announce buybacks that breach minimum public shareholding (MPS) norms.

Deep Dive

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Under the new taxation framework, public shareholders are taxed on their actual capital gains when shares are tendered, making a buyback tender equivalent to a normal market sale and removing the earlier differential tax advantage.
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The change shifts the tax burden from the company undertaking the buyback to the participating public shareholders.
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SEBI added electronic dissemination of buyback information to shareholders in addition to newspaper advertisements, and aligned the minimum interval between two buyback offers with the Companies Act, 2013.
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The board of SEBI had approved the proposal in June, and the open-market-through-exchange method is noted as being widely adopted in international jurisdictions.

Exam Focus

Examiners may ask the regulator involved (SEBI), the effective date (August 1, 2026), the cap on the execution period (66 working days), the buyback ceiling (less than 15% of paid-up capital and free reserves), or the year open-market buybacks were phased out (2025).

Exam Relevance & Angle

The move directly affects capital markets and corporate finance, and its precise parameters — the August 1, 2026 start, the 66-working-day cap, and the 15% ceiling — set by SEBI, are the kind of regulator-and-figure facts commonly tested in banking, SEBI Grade A and economy sections.

Target Exams

SBI POIBPS PORBI Grade BNABARD Grade AUPSC CSE

Background & Context

A share buyback is a corporate action in which a listed company repurchases its own shares from existing shareholders, reducing the number of outstanding shares and returning surplus cash to investors; it is used as a capital allocation tool and can support the share price. In an open market buyback through stock exchanges, the company buys shares via the regular trading system rather than through a separate tender offer. The Securities and Exchange Board of India (SEBI), established in 1992 as India's capital markets regulator, frames the rules governing such buybacks, including limits tied to a company's paid-up capital and free reserves and to minimum public shareholding (MPS) requirements. Buyback taxation and the earlier six-month execution window have been recurring policy concerns in this space.