A Comprehensive Guide to Unlisted Shares Taxation in India
Unlisted shares belong to companies not traded on recognised stock exchanges like NSE or BSE. Typically held by private investors such as founders and venture capitalists, these shares often come from early-stage firms or companies preparing for an IPO. Though less liquid, they offer high growth potential.
Key Taxation Changes: Old vs New Regime
| Aspect | Old Tax Regime | New Tax Regime |
|---|---|---|
| Long-Term Capital Gains (LTCG) Tax | 20% with indexation | 12.5% without indexation |
| Short-Term Capital Gains (STCG) Tax | As per income tax slab | As per income tax slab |
Benefits of Investing in Unlisted Shares
- Early Investment: Access high-growth firms before IPO.
- Diversification: Reduce market risk with alternative assets.
- High Returns Potential: Earn substantial gains as companies expand.
How to Invest in Unlisted Shares
- Pre-IPO Investments: Buy shares of firms planning to go public.
- Start-ups: Invest in promising early-stage companies.
- ESOPs: Purchase shares from employees post-lock-in period.
- Private Placements: Buy directly from company promoters.
- PMS & AIFs: Invest through structured funds.
Taxation on Unlisted Shares
- Capital Gains Tax:
- Long-term (held >24 months): 12.5% tax.
- Short-term (held <24 months): Taxed per income slab.
- Gift Tax: Gifts to relatives are exempt, but sales incur capital gains tax.
- Reporting Requirements: Declare holdings in ITR-2 or ITR-3 to avoid penalties.
Computation of Capital Gains
Capital Gain = Sale Price – Purchase Price (including brokerage deductions).
Key ITR Considerations
- Declaration: Disclose securities transactions.
- Set-Off Rules: Losses offset only against capital gains.
- Treatment of Losses:
- Long-term losses offset only against LTCG.
- Short-term losses offset against STCG or LTCG.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.