How unlisted shares are taxed in India
Reviewed by GrowFast's desk. General information, not advice.
The short answer
For a resident individual in the tax year 2026-27, a gain on unlisted shares held for more than 24 months is long-term and taxed at 12.5% without indexation. A gain on shares held for 24 months or less is short-term and taxed at your slab rate. Surcharge, where it applies, and a 4% cess are added.
Capital gains
- Long-term: unlisted shares held for more than 24 months. The gain is taxed at 12.5%, without indexation.
- Short-term: held for 24 months or less. The gain is added to your income and taxed at your slab rate.
- The Rs 1.25 lakh a year exemption for long-term gains applies to listed shares on which securities transaction tax was paid. It does not apply to unlisted shares.
- Surcharge, where your income attracts it, and health and education cess of 4% are charged on top.
These rules are in the Income-tax Act, 2025, which has applied since 1 April 2026. Older articles cite the section numbers of the 1961 Act; the numbers have changed.
If the price is below fair market value
- Buyer: if you buy unlisted shares for less than their fair market value and the difference is more than Rs 50,000, the difference can be taxed as your income.
- Seller: if you sell unquoted shares for less than their fair market value, the fair market value is treated as your sale price when your gain is worked out.
- Fair market value is worked out by a method the tax rules prescribe, not by what a dealer quotes.
Other costs and paperwork
- Stamp duty of 0.015% of the amount is collected by the depository on an off-market transfer. By law the seller is liable for it.
- No securities transaction tax applies to a private off-market sale.
- PAN must be quoted for a purchase or sale of unlisted shares above Rs 1,00,000 in a transaction.
If the company lists later
If you sell after the company lists, the sale is on a stock exchange and securities transaction tax applies. Whether the lower rates for listed shares then apply to shares you bought before listing depends on conditions in the law. Ask a tax adviser before you rely on them.
Questions people ask
Is indexation available on unlisted shares?
No. Since 23 July 2024 long-term gains on unlisted shares are taxed at 12.5% without indexation.
Can a loss on unlisted shares be set off?
Capital losses can generally be set off against capital gains and carried forward, subject to the rules in the Income-tax Act. Ask a tax adviser how they apply to you.
Is this guide tax advice?
No. It is a general summary for resident individuals. Your position may differ; consult a chartered accountant.
Sources
- Income-tax Act, 2025, section 197: tax on long-term capital gains
- Income-tax Act, 2025, section 92: shares received for less than fair market value
- Income-tax Act, 2025, section 79: fair market value as the sale price of unquoted shares
- Income-tax Rules, 2026, rule 159: transactions for which PAN must be quoted
- NSDL procedure for collecting stamp duty on off-market transfers
This guide is general information as the rules stood on 9 Oct 2026. Rules and tax rates change. It is not investment, legal or tax advice; check the sources and take professional advice before you act. See the Terms and Conditions.