SEBI (Buy-Back of Securities) Amendment Regulations 2026

The SEBI (Buy-Back of Securities) Amendment Regulations 2026 were notified on 1 July 2026 and come into force on 1 August 2026. They restore open market buy-back through the stock exchange, a route that has been unavailable to listed companies since 1 April 2025, subject to a ceiling of less than 15% of paid-up capital and free reserves. They also make the appointment of a merchant banker discretionary, freeze promoter shareholding at ISIN level for the duration of an offer, and remove the separate exchange window through which buy-back trades were previously executed.

This article sets out what changes under the SEBI (Buy-Back of Securities) Amendment Regulations 2026, and what stays the same.

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The amendment carries notification number SEBI/LAD-NRO/GN/2026/306 and amends the SEBI (Buy-Back of Securities) Regulations, 2018, which were themselves last amended on 20 November 2024. It runs to seventeen substantive changes across eleven regulations, along with a set of drafting corrections that alter nothing.

The practical effect is straightforward. From 1 August 2026, a listed company can once again buy its own shares on the exchange at prevailing market prices, instead of being confined to a tender offer or a book-building process.

Several published summaries of this amendment have misstated what it contains, in both directions. Some report a cap that they say is absent when the text inserts it expressly; others report a utilisation requirement as new when it has been in force since March 2023. Everything below is taken from the gazette text and the two consultation papers that preceded it, each of which is linked in the references.

Why the stock exchange route was withdrawn and brought back

The stock exchange route was withdrawn because SEBI concluded it treated shareholders unequally, and it has been brought back because the tax reform that drove most of that inequality has since been undone. Both halves of that sentence come from SEBI’s own consultation paper of 2 April 2026.

SEBI gave two grounds for discontinuing the route. The first was structural: a company’s entire purchase order could match against the sale orders of one or very few shareholders, leaving another shareholder who specifically wanted to participate with nothing. Acceptance was, in SEBI’s words, “a matter of chance due to the price-time order matching mechanism rather than a deliberate and equitable process”.

The second ground was tax. Under Section 115QA of the Income Tax Act, 1961, the company paid buy-back tax and the shareholders who succeeded in matching paid nothing on their gains. Shareholders who wanted to participate but whose orders did not match were, again in SEBI’s words, “deprived of tax exemptions”, which made the route “inequitable from a taxation perspective”.

So SEBI phased the route out rather than ending it at once, on a glide path that cut both the size limit and the completion window in three annual steps.

Then the tax position moved. From 1 October 2024, buy-back taxation shifted from the company to the shareholder, with the entire consideration treated as deemed dividend and the cost of acquisition treated as a capital loss. The Income Tax Act, 2025, as amended by the Finance Act, 2026 and effective from 1 April 2026, went further and made buy-back consideration taxable under the head of capital gains.

That change removed the original objection. A public shareholder selling into a buy-back is now taxed on actual capital gains, which is what would have happened on an ordinary sale in the market. SEBI’s conclusion was that the earlier concern, “i.e. tax-induced inequity among public shareholders, now stands addressed”.

The push came from industry. FICCI asked for the route back on the ground that it is an efficient and internationally preferred mechanism, and the Association of Investment Bankers of India argued that it lets companies absorb surplus selling pressure over a continuous period, prevents panic selling, and restores retail confidence. FICCI asked for it to be implemented through a separate window at the exchanges. SEBI restored the route and deleted the separate window instead, which is dealt with below.

Conditions for an open market buy-back under the SEBI (Buy-Back of Securities) Amendment Regulations 2026

The conditions for an open market buy-back under the SEBI (Buy-Back of Securities) Amendment Regulations 2026 are set out in a new third proviso to regulation 4(iv)(b). From 1 August 2026, a buy-back from the open market through the stock exchange “shall be less than fifteen per cent of the paid up capital and free reserves of the company, based on both standalone and consolidated financial statements of the company”.

The second proviso, which carried the discontinuation, has been closed off rather than deleted. The words “till July 31, 2026” are inserted after “April 1, 2025”, so the period during which the route was unavailable now has an end date on the face of the regulation.

The standalone and consolidated test

The 2018 proviso applied the ceiling “based on the standalone or consolidated financial statements of the company, whichever sets out a lower amount”. The 2026 proviso says “based on both standalone and consolidated financial statements”. The lower of the two figures still binds in practice, since a buy-back has to sit under the ceiling on both sets of accounts, but the drafting is now direct rather than requiring the reader to run a comparison. No competing analysis of the amendment has picked this up.

Two further conditions are new. Regulation 4(xi) prohibits any buy-back offer that “results in the breach of the minimum public shareholding requirements” prescribed under the Securities Contracts (Regulation) Rules, 1957 or specified under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This closes off a route by which a company could have used a buy-back to push its public float below the statutory floor.

Regulation 4(vii) has been substituted so that the gap between successive buy-backs is now keyed to “such period as may be prescribed under the Companies Act, 2013”, measured from the closure of the preceding offer. The regulations no longer carry their own hardcoded interval, so the answer moves with the Act rather than sitting in two places at once.

One long-standing condition is worth restating because it shapes everything in the sections that follow. Regulation 16(ii) is unchanged: a buy-back through the stock exchange cannot be made from the promoters or persons in control of the company. Promoters can only exit through a tender offer, which is why the promoter freeze discussed later matters mainly in that context. For readers who want the underlying mechanics of how a buy-back works, rather than what has just changed, our explainer on buyback of shares by companies covers the ground, and the methods available under the 2018 framework are set out separately.

Timelines and shareholder communication

The timelines under the amendment are tighter at the front end and longer at the back end than the position that applied immediately before the route was suspended.

Regulation 16(iv)(b) has been substituted. The public announcement must now be made “within two working days from the date of passing of the resolution by the board of directors or the date of declaration of results of the postal ballot for special resolution, as the case may be”, and must contain the disclosures specified in Schedule IV. Fixing the trigger to the declaration of postal ballot results removes an ambiguity about when the clock starts where shareholder approval is taken by ballot.

A genuinely new obligation sits at regulation 16(iv)(ba). Within one working day of the public announcement, the company must “send an intimation through electronic mode regarding the open market buy-back offer to those persons who were its shareholders as on the date of making the public announcement”. Regulation 22A(v) inserts the same duty for the book-building route. Newspaper publication was previously the practical limit of a company’s outreach, so this is a direct line to the shareholder register.

Regulation 17(iii) is new and sets the offer period: “With effect from August 1, 2026, the buy-back offer shall open within four working days from the date of the public announcement and close within sixty-six working days from the date of opening of the offer.”

Sixty-six working days is a restoration rather than a restriction. It is the window that applied to offers opened between 1 April 2023 and 31 March 2024, before the limit was cut to 22 working days for the year to 31 March 2025. Read against the immediately preceding position, companies get three times the completion period they last had. As with regulation 4, the proviso to regulation 17(ii) has been closed off with the words “till July 31, 2026”.

Execution on the exchange without the separate window

Execution changes because the separate window is gone. Regulation 16(i) carried an Explanation, inserted in March 2023, which read: “For the purpose of buy-back through stock exchange, a separate window shall be created by the concerned stock exchange and such window shall remain open for the period specified in these regulations.” The 2026 amendment omits it. Buy-back purchases will now execute in the normal order book alongside every other trade.

Regulation 17(i) has also been omitted. It read: “The identity of the company as a purchaser shall appear on the electronic screen when the order is placed.” From 1 August 2026, a company buying its own shares will not be identified as the purchaser on the trading screen.

Those two deletions work together. A buy-back trade becomes an ordinary market trade, executed in the ordinary order book, without a label attached. The design answers a practical objection to the old model, which is that a visible, predictable buyer with a published mandate is straightforward for other participants to trade ahead of. Transparency for shareholders now rests on the disclosure regime rather than the screen, which is where the new one working day intimation duty and the daily website disclosure under regulation 18 do their work.

Note the sequence. FICCI asked for the route to return through a separate window, and SEBI returned the route and removed the window that already existed.

Restrictions that survive

None of the trading restrictions have been relaxed. The limits specified by SEBI’s circular of 8 March 2023 continue to apply: a company cannot purchase more than 25% of the average daily trading volume, in value terms, of its shares computed over the ten trading days preceding the day of purchase; it cannot place bids in the pre-open session, the first thirty minutes, or the last thirty minutes of the regular trading session; and its purchase order price must stay within plus or minus 1% of the last traded price.

The structural restrictions in regulation 16 also survive untouched. Buy-back must be through the order matching mechanism, other than the “all or none” order matching system, under regulation 16(iii). It can be undertaken only in frequently traded shares under regulation 16(v). And it cannot be made from promoters or persons in control under regulation 16(ii).

One point of precision, because the omission is narrow. Regulation 19 provides a separate window for buy-back of shares held in physical form, and the amendment does not touch it. Only the Explanation to regulation 16(i) has gone, so the separate window survives for physical shares and disappears for everything else.

Merchant banker appointment under the SEBI (Buy-Back of Securities) Amendment Regulations 2026

Merchant banker appointment under the SEBI (Buy-Back of Securities) Amendment Regulations 2026 is now discretionary. A new regulation 24A, under the marginal head “Option to company for not engaging merchant banker”, provides that “notwithstanding anything contained in these regulations, the requirement of engaging a merchant banker will be discretionary on part of the company undertaking buy-back of shares or other specified securities under these regulations”.

A company that drops the merchant banker does not drop the work. Regulation 24A(2) reallocates nine functions to five other parties.

What this means in practice

The reallocation moves liability, not just labour. The secretarial auditor certifies that the offer complies with the regulations and issues the due diligence certificate under regulations 8(i)(aa) and 25(vi), which is the certification that most directly exposes a professional to SEBI action if an offer turns out to be non-compliant. The statutory auditor takes on oversight and operation of the escrow account, including bank guarantees, cash deposits, approved securities, invocation rights and release, across regulations 9(xi), 20 and 25.

The compliance officer picks up the extinguishment functions: presence during extinguishment or destruction of securities under regulation 21(iii), and certification of compliance with extinguishment under regulation 11(iii)(a). That converts a role that was largely one of internal coordination into one that carries a signature on the record. The stock exchanges certify adequacy of sell orders and the volume weighted average price under regulations 20(viii)(a) and 20(viii)(b), which places a certification function with a market infrastructure institution rather than a private intermediary. The company itself takes the filings, the final report, and the assurance that funds are available.

There is a drafting point that companies going this route will want clarified. Regulation 20(iv)(a), as substituted, still requires the bank guarantee to “be in favour of the merchant banker”, and regulation 20(iv)(b) still provides that “the bank guarantee shall be returned by the merchant banker”. Yet regulation 24A(2) assigns escrow oversight, including regulations 20(iv)(a) and 20(iv)(b), to the statutory auditor where no merchant banker is appointed. How a guarantee is held in favour of, and released by, an intermediary who has not been appointed is a question the text does not answer on its face, and it is one for SEBI to address rather than for a company to resolve on its own view.

The direction of travel is not confined to buy-back. The SEBI Takeover Code amendment that took effect in January 2026 moved offer pricing for infrequently traded shares away from merchant bankers and to independent registered valuers registered with the IBBI, as set out in this analysis of the Takeover Code 2025 amendment and open offer pricing. Two frameworks, one direction: the merchant banker is being moved out of the centre of the transaction. For professionals whose practice depends on that work, the commercial consequence is a narrower fee base in buy-back mandates, which is worth reading alongside a wider view of where investment banking work actually comes from.

Promoter share freeze and escrow

The promoter share freeze applies from the date of the enabling resolution. A new regulation 24(i)(ea) provides that the shares or other specified securities held by the promoters and promoter group, including their associates, for which buy-back is undertaken, “shall remain frozen at the International Securities Identification Number (ISIN) level during the period from the date of passing of the resolution by the board of directors or the special resolution, as the case may be, till the closing of the offer”. The company must instruct the depositories to give effect to the freeze.

Two carve-outs qualify it. In a tender offer, the freeze does not apply “for the limited purpose of tendering shares or other specified securities in the buy-back offer”, which it could not sensibly do, since promoters are entitled to participate in a tender offer. Where an encumbrance was created before the buy-back period began, transfer on invocation of that encumbrance may be allowed, though the freeze continues to apply to the securities after invocation and the transfer remains subject to conditions the Board may specify.

The escrow provisions have been firmed up. In regulation 20(ii) the word “may” has been substituted with “shall”, so the forms the escrow account may take are no longer a matter of discretion.

Regulation 20(iv)(a), as substituted, requires a bank guarantee to be valid for thirty working days after expiry of the buy-back period or after completion of all obligations under the regulations, whichever is later. Regulation 20(iv)(b) provides that it is returned only after all obligations are completed. Both changes close the gap between the end of an offer and the end of the company’s obligations under it. For the wider context in which buy-back sits as a capital management tool, see our discussion of capital restructuring and buyback of shares.

What the amendment leaves unchanged

The amendment leaves several provisions untouched, and the gap between what it changes and what it has been reported to change is wide enough to be worth setting out directly.

The 40% utilisation requirement is unchanged. Regulation 15(ii) requires a company to ensure “that at a minimum of forty per cent of the amount earmarked for the buy-back, as specified in the resolution of the Board of Directors or the special resolution, as the case may be, is utilized within the initial half of the specified duration”. It was inserted by the 2023 amendment with effect from 9 March 2023, and the 2026 amendment does not touch regulation 15 at all.

Reports presenting the 40% rule as a new requirement from 1 August 2026 are describing a rule that has been in force for over three years. The overall utilisation requirement in regulation 15(i), which was raised from 50% to 75% in 2023, is likewise unchanged.

The 15% figure needs the opposite correction. The amendment does insert it, expressly, as the new third proviso to regulation 4(iv)(b), so analysis reporting that the amendment contains no such threshold is mistaken.

What the figure represents, though, is a restoration and not a new cap. Fifteen per cent was the ceiling that applied until 31 March 2023, before the glide path cut it to 10%, then 5%, then zero. Measured against the position since 1 April 2025, when a company could not use this route at all, a ceiling of just under 15% is a liberalisation.

Two dates are reported inconsistently, and both are defensible. The notification is dated 1 July 2026 at Mumbai and carries the Gazette of India number 424 for Wednesday, 1 July 2026. Its digital publication stamp is 6 July 2026, which is why SEBI’s own website lists the amendment under that date. The date that governs is neither: the regulations come into force on 1 August 2026.

Finally, the amendment makes a number of changes that do nothing at all. Regulations 8, 9, 11 and 21 carry substitutions of “until” with “till”, insertions of definite articles, and corrections of punctuation. They occupy a substantial share of the notification’s length and change no obligation.

Frequently asked questions

When do the SEBI (Buy-Back of Securities) Amendment Regulations 2026 come into force?

They come into force on 1 August 2026. The notification, numbered SEBI/LAD-NRO/GN/2026/306, is dated 1 July 2026 and was digitally published in the Gazette of India on 6 July 2026, which is the date SEBI’s website lists against it.

What is the maximum size of an open market buy-back through the stock exchange from 1 August 2026?

It must be less than 15% of the company’s paid-up capital and free reserves, assessed on both the standalone and the consolidated financial statements. This restores the ceiling that applied until 31 March 2023.

Is a merchant banker still required for a buy-back?

No. Regulation 24A makes the appointment discretionary from 1 August 2026. A company can still appoint one, and the regulations continue to assume a merchant banker in places, including the bank guarantee provisions in regulation 20(iv).

Who performs the merchant banker’s duties if a company does not appoint one?

Regulation 24A(2) reallocates nine functions across five parties. The company takes filings, the final report, availability of funds, and Companies Act compliance. The secretarial auditor certifies compliance and issues the due diligence certificate, while the statutory auditor oversees the escrow account.

The stock exchanges certify adequacy of sell orders and volume weighted average price, and the compliance officer handles extinguishment.

How long does a company have to complete an open market buy-back?

The offer must open within four working days of the public announcement and close within sixty-six working days of opening. Separately, and unchanged, at least 40% of the earmarked amount must be used in the first half of that period, and at least 75% overall.

Are promoter shares frozen during a buy-back?

Yes. Under regulation 24(i)(ea), promoter and promoter group holdings, including those of associates, are frozen at ISIN level from the date of the board or special resolution until the offer closes. The freeze does not prevent tendering into a tender offer, and transfers on invocation of pre-existing encumbrances may be allowed while the freeze continues to apply.

How is buy-back taxed in the hands of shareholders?

Since 1 April 2026, under the Income Tax Act, 2025 as amended by the Finance Act, 2026, buy-back consideration is taxable as capital gains. Promoter shareholders pay an additional tax component on top: domestic companies pay 12.5% long term or 20% short term plus an additional 9.5% or 2% respectively, and promoter shareholders other than domestic companies pay an additional 17.5% or 10%. A 12% surcharge applies on that additional tax under Section 3(6) of the Finance Act, 2026, and does not apply to non-promoter shareholders.

Is there still a separate window on the exchange for buy-back?

Not for dematerialised shares. The amendment omits the Explanation to regulation 16(i), which had required the exchange to create a separate window, so buy-back now executes in the normal order book. Regulation 19 continues to provide a separate window for shares held in physical form.

References

• SEBI (Buy-Back of Securities) (Amendment) Regulations, 2026, notification No. SEBI/LAD-NRO/GN/2026/306, dated 1 July 2026
• SEBI (Buy-Back of Securities) Regulations, 2018, last amended on 28 November 2024
• Consultation Paper: Re-introduction of Open Market Buy-Back of Shares or Other Specified Securities through Stock Exchange, 2 April 2026
• Companies Act, 2013, Section 68
• Securities Contracts (Regulation) Rules, 1957
• SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
• Income Tax Act, 2025, as amended by the Finance Act, 2026

This article is for informational and educational purposes only and does not constitute legal advice. For advice on a specific buy-back, consult a qualified professional.