Income Tax on Unlisted Shares in India

Originally published at: Income Tax on Unlisted Shares in India | Learn by Quicko

A Stock that is not listed on a recognized 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…

Hi @Aditya_s,

When a taxpayer sells any long-term capital asset, he/she can claim exemption from capital gains tax by investing into specified securities or units of the specified fund as per Sec 54E, 54EA, 54EB, 54EE. Thus, if you want to claim exemption from capital gains on sale of long term unlisted shares, you can make specified investments. Read more about it here – Capital Gain Exemption.

Can I offset the Long term capital loss of listed shares with long term capital gains of unlisted shares?
Please advise

Hi @Niraj,

LTCL from listed shares can be set off against LTCG from unlisted shares since they are long-term and capital gain in nature.

Hi

I have 2 queries

  1. Is indexation mandatory for LTCG from RSU sale OR can we pay 10% tax without indexation benefits.

  2. I purchased a land from LTCG amount. Can it be claimed for exemption?

Regards

Pankaj

Hi @Pankaj_Jindal

  1. You can pay 10% tax without indexation benefit if the shares sold by you are listed on the stock exchange in India.

  2. You can claim exemption u/s 54F for purchase of land if you are planning to construct house property on that land within 2 years of LTCG.

If the shares purchased are now unlisted on NSE/BSE. Can this loss be written off?

@Nihal,

Capital gain/losses arise only when there is a transfer of capital asset. If the capital asset is not transferred, there will not be any capital gain or loss. Hence, in your case, you cannot set it off against Capital Gains unless the capital loss is realised. Capital Losses can be booked but at the time of buy-back or liquidation of a company when the actual transfer occurs.

Hope this helps

In response to your earlier comment:
Capital gain/losses arise only when there is a transfer of capital asset. If the capital asset is not transferred, there will not be any capital gain or loss. Hence, in your case, you cannot set it off against Capital Gains unless the capital loss is realised. Capital Losses can be booked but at the time of buy-back or liquidation of a company when the actual transfer occurs.

Could u please suggest what would be the way to transfer the stock that went delisted from BSE/NSE? Basically i consider it worthless and want to write it off. The company is already in liquidation. What process I should follow to claim the long term capital loss.

@Kaushal_Soni @AkashJhaveri @Laxmi_Navlani @Divya_Singhvi @Sakshi_Shah1 can you?

Hey @Naveen_Jain

If stocks are delisted on the exchanges like BSE/NSE and you haven’t participated in delisting offer then stocks lying in your demat account has no value until it’s been transferred or sold. Capital gain income will arise only when the capital asset (i.e here shares) are sold or transferred to the beneficiary.

Hence, in your case, capital gain or loss shall not apply as shares are worthless (until it remains in demat account and not transferred) after company is delisted.

As per section 46(1), where a shareholder on the liquidation of a company, receives any money or other asset from the company in lieu of the shares held by him, such a shareholder shall be chargeable to income-tax under the head ‘Capital gains’ in respect of the money and the asset so received.

In this case, the consideration price for capital gain purposes shall be money received and/or the market value of the other assets on the date of distribution minus deemed dividend within the meaning of section 2(22)(c).

You can read below article for more insights about capital gain tax:

I hope, it helps!

Hi,

Does 1 lakh limit on LTCG is applicable to shares not listed in India, or we have to pay 20% tax even after holding it for more than 24 months ?
Let’s say I have received RSUs of the parent company whose shares are listed on NYSE, but I am selling these shares after 24 months and the profit that I received is 80,000.
Do I have to pay 20% tax on 80,000 ?

@Kaushal_Soni @Divya_Singhvi @Saad_C @Laxmi_Navlani @AkashJhaveri @Sakshi_Shah1 can you help with this?

Hey @Saurabh

one lakh limit on LTCG is only applicable to shares listed in india and not on shares listed on foreign stock exchanges like NYSE.

Any capital gain from sale of foreign stocks are also taxed in India. When foreign stocks are sold within 24 months then it will be treated as short term, other wise long term.

You can read below article for more insights about foreign stock taxations:

Thanks @Kaushal_Soni,
One further clarification, so per article Income Tax on Foreign Shares | Learn by Quicko
the capital gains from foreign stocks will be treated as capital gains and can be set-off against other long term capital loss.

So, say I have gained 80k by selling foreign stocks after holding it for more than 24 months and have long term capital loss of 50k from stocks listed in India.
So these can be adjusted/setoff and will have to pay tax on 30k only.
Is this understanding correct ?

Hey @Saurabh

LTCG intra head set-off is allowed irrespective of type of shares.

Your understanding correct!

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Hi,
I exercised my ESOP option in 2019 and received share certificate of a unlisted company.

Do I need to declare the unlisted shares in ITR for every FY or just the FY when I was granted/purchased the unlisted shares ?

Hi @Nireka , I’ve STCL from listed shares carry forwarded from previous year. I’ve received STCG from unlisted (pvt ltd) company due to ESOP buyback (TDS deducted as per salary slab).

Can I offset the STCG from unlisted share with losses carry forwarded from listed shares?

Hey @Shubhabrata_Naha

Yes, you can set-off the STCL against STCG irrespective of the nature of securities i.e. whether listed or unlisted.

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Hey @vk9

You need to declare unlisted shares every year while filing ITR irrespective of purchase during year or not. If you are holding shares or sell the shares for particular AY then it has to report in ITR.

Hope, it helps!