At its board meeting on June 19, 2026, SEBI approved the reintroduction of open market share buybacks through stock exchanges, effective August 1, 2026, reversing a ban it had enforced just 14 months earlier, on April 1, 2025. The trigger was not just a change of heart from the regulator. It was the tax shift announced in the Budget.
Why SEBI Banned Exchange Buybacks in the First Place
The original ban had a documented, specific cause. Under the earlier regime, companies paid Buyback Distribution Tax under Section 115QA of the Income Tax Act, while shareholders who participated received proceeds largely exempt from tax liability.
This enabled promoters to receive distributions through buybacks instead of dividends and avoid higher personal taxation. Algorithmic traders compounded the inequity; they could react faster to buyback windows than retail investors, creating a structural tilt that SEBI could not accept. Between 2022 and 2025, SEBI progressively cut the permissible limit from 15% to zero.
Also Read: SEBI Board Meeting: Buybacks Return, MFs Get Intraday Borrowing — 6 Key Decisions
What Changed: The Budget Removed the Problem
Effective April 1, 2026, under the Income Tax Act, 2025, and the Finance Act, 2026, buyback proceeds are now taxed as capital gains in the hands of the shareholder, not as a tax borne by the company.
Long-term holdings attract 12.5% capital gains tax; short-term holdings attract 20%. Promoter shareholders face an additional surcharge to prevent tax arbitrage.
For most non-promoter shareholders, the new regime broadly aligns buyback taxation with capital gains treatment, reducing the earlier tax-arbitrage concern.
EBI’s own April 2026 consultation paper confirmed this: “the differential tax advantage that existed earlier between shareholders who were able to participate in the buy-back and those who were not would not exist” under the new regime. The regulator did not change its standards. The tax code changed the facts on the ground.
The New Rules: Stricter Than Before
SEBI has not simply restored the old mechanism. The August 1 framework carries significantly tighter guardrails than anything that existed pre-2022.
| Rule | Detail |
|---|---|
| Effective Date | August 1, 2026 |
| Completion Window | Maximum 66 working days from opening |
| Mandatory Deployment | At least 40% of earmarked funds in first half of window |
| Promoter Participation | Strictly barred; shares frozen/locked during buyback period |
| Trading Mechanism | Through regular secondary market—no separate buyback window |
| Public Float Safeguard | Execution must not breach 25% minimum public shareholding |
The 66 working-day window is a sharp compression from the up-to-six-month period the earlier framework permitted.
The mandatory 40% deployment rule closes off the option of announcing a buyback and sitting on the cash while merely signalling intent to the market.
The promoter lock-in is new; it prevents management from selling into a rising market while the company simultaneously buys back shares.
Which Companies Could Come Into Focus?
None of the companies below has announced a fresh exchange-route buyback following SEBI’s June 19 decision. These are companies that investors are likely to watch given surplus cash positions, low leverage, and consistent free cash flow generation.
Information Technology
India’s IT sector is the most natural candidate. Low capex requirements, dollar revenue, and asset-light models mean cash accumulates structurally. All four names below have a history of capital return through buybacks or consistent dividends.
| Company | FY26 Capital Return / Cash Position | Why It May Come Into Focus |
|---|---|---|
| TCS | Cumulative buybacks over ₹40,000 crore in the last decade | India’s most aggressive buyback user; dividend-plus-repurchase model |
| Infosys | FCF of â‚ą33,097 crore in FY26; 112.3% FCF conversion; policy to return ~85% of FCF over 5 years | Policy-driven capital return: open market route adds execution flexibility |
| Wipro | â‚ą15,000 crore tender buyback in FY26 at â‚ą250/share for 60 crore shares | Used tender route when exchange route was closed; now has a second option from August 1 |
| LTIMindtree | Strong free cash flow; asset-light mid-large cap with consistent profitability and regular dividend payouts | Benefits from same IT sector cash dynamics |
Infosys reported FY26 free cash flow of $3.7 billion, 112.6% of net profit, with a stated policy of returning approximately 85% of cumulative free cash flow over a five-year period through dividends and/or buybacks. Wipro’s board approved a ₹15,000 crore tender buyback in FY26, offering ₹250 per share for up to 60 crore shares representing 5.72% of equity, with free cash flow slightly exceeding net income. The exchange route was unavailable when Wipro made that call. It is available from August 1.
FMCG
Consumer staples companies generate stable, recurring cash flows with limited reinvestment needs. Mature businesses with saturated distribution networks often accumulate surplus capital that dividends alone do not fully deploy.
| Company | Why It May Come Into Focus |
|---|---|
| Hindustan Unilever | FY26 dividend payout of â‚ą41 per share; parent Unilever globally uses buybacks as a capital return tool |
| Nestlé India | Consistently profitable; low debt; mature product portfolio with limited large-ticket capex |
| Britannia Industries | Asset-light biscuits business; strong free cash flow generation |
| Colgate-Palmolive India | Predictable cash generation; limited need for large-scale reinvestment |
Pharmaceuticals
Large pharma names carry healthy balance sheets and generate consistent profitability. The critical variable here is acquisition intent, companies actively hunting for M&A deals will preserve cash rather than deploy it into buybacks.
| Company | Current Position | Investor Read |
|---|---|---|
| Divi’s Laboratories | Debt-light, profitable, conservative capital allocation; no large M&A history | Watchlist candidate if surplus cash continues to build |
| Dr. Reddy’s Laboratories | Healthy balance sheet; regular shareholder payouts including ₹8/share dividend (ex-date July 9, 2026) | Possible candidate, but depends on growth and M&A plans |
| Sun Pharma | Committed to $11.75 billion all-cash Organon acquisition — the largest overseas acquisition by an Indian pharma firm | Less likely near term as capital is tied to M&A |
Banks and NBFCs — A Limited Play
Banks face RBI’s regulatory capital requirements — buybacks would erode Tier-1 capital ratios, making the route effectively off the table for most scheduled commercial banks. Some well-capitalised NBFCs with excess capital above regulatory minimums could consider the route, but this remains a watch theme rather than an immediate one.
Also Check: Quarterly Results Calendar 2026 — Upcoming CompanyÂ
What This Means for Retail Investors
Unlike tender offers, retail investors do not need to apply, track record dates, or worry about allotment ratios. When a company acts as a consistent, large-scale buyer in the order book during an open market buyback, it creates effective price support and reduces impact cost for retail shareholders who want to exit, their selling pressure is absorbed by the company’s concurrent buying.
Tax treatment is now straightforward: gains are taxed at 12.5% LTCG for shares held over 12 months and 20% for shorter holding periods, the same as any other secondary market sale. No forms, no allotment risk, no premium chase.
Track live buyback announcements and corporate actions on the NiftyTrader Stock Screener.
FAQs
Q. From when can companies start open market buybacks through stock exchanges?
SEBI’s revised framework is effective August 1, 2026, as approved at the regulator’s board meeting on June 19, 2026. Companies must complete the entire process within 66 working days from the opening date and must deploy at least 40% of earmarked funds in the first half of that window. Promoters are barred from participating, and their shares remain frozen throughout the buyback period.
Q. Are buyback gains taxable for shareholders after SEBI’s 2026 rule change?
Yes. From April 1, 2026, buyback proceeds are taxed as capital gains in the shareholder’s hands, 12.5% for long-term holdings (over 12 months) and 20% for short-term. The new regime broadly aligns buyback taxation with capital gains treatment on normal secondary market sales, which removed the fairness objection that led to the 2025 ban.
Q. Which sector is most likely to use open market buybacks first after August 1?
The IT sector is the most probable early mover; TCS, Infosys, Wipro, and LTIMindtree generate strong free cash flows, have low capex needs, and have a consistent history of capital returns. Wipro already executed a â‚ą15,000 crore tender buyback in FY26 using the tender route because the open market window was closed. That constraint disappears on August 1.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. The companies mentioned have not announced any open market buybacks following SEBI’s June 19, 2026, decision. Investments in securities markets are subject to market risk. Read all related documents carefully before investing. Past performance is not indicative of future results.
