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Are unlisted shares taxable in India?
Yes. Profits from selling unlisted shares are subject to capital gains tax under the Income Tax Act, 1961. The rate depends on how long you held the shares — under 24 months (short-term) or 24 months and above (long-term). There is no tax at the time of purchase.
Capital gains tax on unlisted shares is governed by Sections 2(42A), 48, and 112 of the Income Tax Act, 1961. The treatment differs from listed shares in one critical way: the holding period threshold for long-term classification is 24 months for unlisted shares versus only 12 months for listed equity.
No STT (Securities Transaction Tax) applies to unlisted share transactions, since STT is only levied on transactions on recognised stock exchanges.
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Short - term vs long-term capital gains — the 24 - month rule
The most important concept in unlisted share taxation is the holding period. Get this wrong and you could pay up to 30% tax instead of 12.5%.
Short-term (STCG)
Held < 24 months
Slab rate
Added to your total income for the year and taxed at your applicable income tax slab — up to 30% for income above ₹15 lakh.
Listed shares: STCG = 20% flat (post July 2024)
Long-term (LTCG)
Held ≥ 24 months
12.5%
Taxed at a flat 12.5% without indexation benefit. Budget 2024 reduced this from 20% (with indexation) effective July 23, 2024.
Listed shares: LTCG = 12.5% (threshold: 12 months)
How the holding period is calculated
The 24-month clock starts from the date of allotment or acquisition — not the date of payment. For shares purchased on Precize, the acquisition date is the date the off-market transfer is confirmed and shares are credited to your demat account. Keep your demat statement and the contract note from Precize as proof.
Why 24 months, not 12?
The 24-month threshold for unlisted shares reflects the higher illiquidity premium of private market investments. Listed shares get the 12-month threshold because they benefit from exchange-based price discovery and daily liquidity — unlisted shares do not. This longer threshold is also why pre-IPO investing rewards patient capital more than short-term trading.
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STCG tax rate on unlisted shares
If you sell unlisted shares within 24 months of acquisition, the gain is classified as Short-Term Capital Gain (STCG) and added to your total income for the financial year. It is then taxed at your applicable income tax slab rate.
| Total income (incl. STCG) | Tax slab | Tax on STCG |
|---|---|---|
| Up to ₹3,00,000 | Nil | Nil |
| ₹3L – ₹7L | 5% | 5% on gains in this slab |
| ₹7L – ₹10L | 10% | 10% on gains in this slab |
| ₹10L – ₹12L | 15% | 15% on gains in this slab |
| ₹12L – ₹15L | 20% | 20% on gains in this slab |
| Above ₹15L | 30% | 30% on gains in this slab |
Worked example — STCG
Scenario: Investor sells unlisted shares within 18 months
Had the same investor held for 30 months instead, the LTCG tax at 12.5% would have been ₹37,500 — a saving of ₹52,500 on the same gain.
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LTCG tax rate on unlisted shares - Budget 2024 changes
Budget 2024 update
LTCG rate on unlisted shares reduced — effective July 23, 2024
The Finance Act 2024 amended Section 112 of the Income Tax Act. Long-term capital gains on unlisted shares are now taxed at 12.5% without indexation, replacing the previous rate of 20% with indexation benefit.
20%
Before July 23, 2024 with indexation
12.5%
From July 23, 2024 without indexation
For most investors holding high-appreciation assets, 12.5% without indexation is more favourable than 20% with indexation — especially for shares that have appreciated 2× or more.
Surcharge on LTCG for HNI investors
| Total income | Surcharge rate | Effective LTCG rate |
|---|---|---|
| Up to ₹1 Cr | Nil | 12.50% |
| ₹1 Cr – ₹2 Cr | 10% | 13.75% |
| ₹2 Cr – ₹5 Cr | 15% | 14.375% |
| Above ₹5 Cr | 15% | 14.375% |
Note: The surcharge on LTCG from unlisted shares is capped at 15% (unlike STCG where it can go higher). This provides a meaningful ceiling for HNI investors.
Worked example — LTCG
Scenario: NSE unlisted shares — buy at ₹1,200, sell at ₹1,900 after 30 months
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Tax on ESOPs in unlisted companies
If you hold ESOPs (Employee Stock Option Plans) in unlisted companies like Zepto, PhonePe, or Swiggy, your tax exposure is split across two distinct events: when you exercise the options, and when you sell the shares.
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STAGE 1 - AT EXERCISE
Perquisite tax on the spread
When you exercise your ESOPs, the difference between the Fair Market Value (FMV) on the date of exercise and your exercise price is treated as a perquisite — part of your salary. This is taxed at your applicable income tax slab rate, regardless of whether you sell the shares. Your employer is required to deduct TDS on this amount.
Perquisite = FMV on exercise date − Exercise price
- 2
STAGE 2 - AT SALE
Capital gains tax on appreciation post-exercise
When you subsequently sell the shares, capital gains tax applies on the appreciation from the FMV at exercise to the sale price. The holding period (for STCG vs LTCG classification) is measured from the date of exercise, not the date of grant. The cost of acquisition for capital gains purposes is the FMV on the exercise date.
Capital gain = Sale price − FMV on exercise date
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START-UP SPECIAL RULE
Deferred tax payment for eligible start-ups
For DPIIT-recognised start-ups, Section 192(1C) of the Income Tax Act allows employees to defer payment of the perquisite tax (Stage 1 TDS) for up to 5 years from exercise, or until sale of shares, or until employment ends — whichever is earlier. This provides meaningful cash-flow relief for employees in pre-IPO companies. Check with your HR or a CA whether your employer qualifies.
Hold ESOPs in Zepto, PhonePe, or another unlisted company?
Consult a CA before exercising
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Calculate your unlisted share tax
Use this calculator to estimate your capital gains tax. Enter your purchase price, sale price, and holding period — the calculator applies the correct STCG or LTCG rate automatically.
Capital gains tax estimator
Indicative estimate only — consult a CA for your final tax liability
Capital gain
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Estimated tax
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Net proceeds
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This is an indicative estimate. It does not account for surcharge (for income > ₹1 crore), cess, platform fees, or other deductions. Consult a Chartered Accountant for your final liability. Prices and rates are as per Budget 2026.
How to calculate your tax — step by step
Determine cost of acquisition
Your purchase price including any brokerage or platform fee paid to Precize. The Precize contract note is your primary document for this figure.
Calculate gross capital gain
Sale price minus cost of acquisition. If you received shares as an ESOP, the cost of acquisition is the FMV on the date of exercise (not the exercise price).
Check if brokerage is deductible
Brokerage and platform fees paid at the time of sale are deductible from the sale consideration under Section 48 of the Income Tax Act, reducing your taxable gain.
Apply the correct rate
Held under 24 months → STCG at your slab rate. Held 24+ months → LTCG at 12.5%. Add surcharge if total income exceeds ₹1 crore.
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How to report unlisted shares in your ITR
Capital gains from unlisted shares must be reported in your Income Tax Return. Here is exactly what to do and which form to use.
Use ITR-2 (not ITR-1)
If you have capital gains of any kind — including from unlisted shares — you must file ITR-2. ITR-1 (Sahaj) does not support capital gains reporting. If you have business income as well, use ITR-3.
Fill Schedule CG — Capital Gains
In ITR-2, go to Schedule CG. Under "Short-term capital gains on assets other than listed" (for STCG) or "Long-term capital gains on unlisted securities" (for LTCG), enter your cost of acquisition, sale consideration, and the resulting gain. Use a separate row for each company and each transaction.
Documents to keep
Contract note from Precize (confirms purchase price, date, and number of shares), demat statement from CDSL/NSDL (confirms holding duration and sale), bank statements showing payment and receipt of funds. Keep these for at least 7 years.
TDS — is it applicable?
TDS is not applicable on OTC unlisted share transactions between resident individuals. TDS may apply in specific situations — such as NRI sellers (20% TDS on LTCG under Section 195), or ESOP perquisites (deducted by employer under Section 192). Confirm with a CA for your specific situation.
Declare even if you haven't sold
If your unlisted share holdings exceed ₹5 lakh in value, you may need to disclose them under Schedule AL (Assets and Liabilities) in ITR-2 — even if you haven't sold and have no capital gains to report. This is a disclosure requirement, not a tax event.
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Tax-saving strategies for unlisted share investors
Legal levers to lower your effective tax on unlisted gains — from holding period to loss set-off and structure. Use this as orientation, then confirm every move with a Chartered Accountant.
Hold for 24+ months — access LTCG
The single most impactful strategy. Waiting past the 24-month mark converts STCG (slab rate, up to 30%) to LTCG (12.5%). The break-even depends on your slab — at 30%, you save 17.5 percentage points on every rupee of gain.
Potential saving: up to 17.5% of capital gain
Loss harvesting — set off STCG losses
Short-term capital losses from unlisted shares can be set off against both STCG and LTCG gains from any capital asset. If you have underperforming unlisted positions, selling them before year-end to crystallise a loss can offset gains elsewhere in your portfolio.
Set off: STCG losses against STCG & LTCG gains
₹1.25L LTCG exemption — check applicability
Section 112A provides a ₹1.25 lakh annual exemption on LTCG — but this applies specifically to listed equity and equity mutual funds (where STT is paid). It does not apply to unlisted shares. Do not incorrectly claim this exemption on unlisted share gains.
Note: Section 112A exemption does NOT apply to unlisted shares
HUF / family trust structures for HNIs
High-net-worth investors can consider holding unlisted shares through a Hindu Undivided Family (HUF) or a discretionary family trust. Each HUF has its own basic exemption limit and slab rates, potentially reducing the effective tax rate on capital gains. This requires careful structuring — consult a CA.
HNI strategy: requires CA-guided structuring
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