Income Tax on Unlisted Shares in India

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Sakshi Shah

Capital Gains
ITR-2
Trading Income
Unlisted Shares

A Stock that is not listed on a recognised stock exchange is an unlisted stock. A trader or investor who buys and sells unlisted stocks should file ITR and pay tax on the income. Sale of Unlisted Shares is a Capital Gains Income as per the Income Tax Act. The Income Tax treatment of unlisted shares is not the same as the listed shares.

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Capital Gain on Sale of Unlisted Shares

Unlisted Stock is not listed on any recognised stock exchange. Thus, the Company does not pay STT i.e. Securities Transaction Tax on such shares. The period of holding is 24 months.

  1. Long Term Capital Gain (LTCG): If an investor sells an unlisted stock held for more than 24 months, gain or loss on such sales is a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL).
  2. Short Term Capital Gain (STCG): If an investor sells an unlisted stock held for up to 24 months, gain or loss on such sale is a Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL).

Income Tax on Unlisted Shares

Income Tax on Trading in unlisted shares is similar to the tax treatment of other capital assets. The following are the income tax rates on the sale of unlisted shares of a Domestic Company or Foreign Company.

Note: In the case of a Non-Resident, LTCG on Unlisted Stock is 10% without Indexation.

Tax on IPO Shares

If the shareholder sells Unlisted Equity Shares of a Company that issues an IPO (Initial Public Offering) to offer shares to the public. Such shares are later listed on a recognised stock exchange and STT is also paid on the same. The tax treatment on the sale of such shares would be the same as in the case of listed shares as follows:

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ITR Form, Due Date and Tax Audit Applicability for Unlisted Shares

FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020
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FY 2019-20: Due Date to file Income Tax Return for both audit and non-audit cases has been extended to 30th November 2020

Carry Forward Loss on Sale of Unlisted Shares

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FAQs

How do I report income from sale of unlisted shares in the Income Tax Return?

You should file ITR-2 and report income from the sale of unlisted shares of a Domestic Company or Foreign Company as Capital Gains. You should pay income tax on it as per rates below:
– Long Term Capital Gain – 20% with indexation
– Short Term Capital Gain – slab rates
The assessee can set off LTCL with LTCG and STCL with both STCG and LTCG. The remaining loss can be carried forward for 8 years.

Can STT be paid on Unlisted Shares?

STT i.e. Securities Transaction Tax is the tax on the purchase and sale of securities listed on a recognised stock exchange in India. Thus, STT is not paid on Unlisted Shares. However, when a company offers shares to the public under IPO i.e. Initial Public Offering, such shares are later listed on the stock exchange. In such cases, STT is charged on the Unlisted Shares.

  • Priyanka M says:

    Can one save the income tax (20% with indexation as per this article) on LTCG from sale of unlisted shares, if one invests that income in another long term investment such as purchase of a residential property in India?
    Can you provide the info on any restrictions for such a provision if it exists?

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