Unlisted Shares Capital Gains Tax: Rates and Rules 2026

Sell unlisted shares after holding them for more than 24 months and the profit is long-term capital gain, taxed at a flat 12.5 percent under Section 112 of the Income-tax Act, with no indexation. Sell within 24 months and the gain is added to your income and taxed at your slab rate.

The 12.5 percent long-term rate applies to unlisted shares sold on or after 23 July 2024. For sales before that date, the old rule was 20 percent with indexation. This changed in the Union Budget 2024 and now covers most equity that is not listed on a recognised stock exchange.

The single question that fixes your tax bill is: did you hold the shares for more than 24 months?

For unlisted shares, the long-term line is 24 months, not 12. Listed shares turn long-term at 12 months, but private company and startup stock needs a full two years. Miss it by a few weeks and your gain moves from a clean 12.5 percent to your full slab, which can be 30 percent plus surcharge and cess for high earners.

The holding period is counted from the date the shares were allotted or acquired to the date of transfer (sale, gift, or buy-back). For ESOP shares, the clock starts on the allotment date when you exercised the option, not the grant date.

1. Fix your sale value. This is the price the buyer actually paid you. See the warning on Section 50CA below if you sold cheaply.
2. Fix your cost of acquisition. For bought shares, it is what you paid. For ESOP shares, it is the fair market value on the exercise date that was already taxed as a perquisite in your salary. Using that FMV as cost stops the same amount being taxed twice.
3. Subtract cost from sale value to get the capital gain. Add any transfer expenses, such as a valuer or broker fee, to the cost side.
4. Apply the rate. More than 24 months holding, apply 12.5 percent. Otherwise add the gain to your total income.
5. Report it in Schedule CG of ITR-2 (or ITR-3 if you have business income) and pay any advance tax due.

If you transfer unlisted shares for less than their fair market value, Section 50CA treats the FMV as your sale price for capital-gains purposes, even if you actually received less. So you can be taxed on a gain larger than the cash you took home.

The FMV of unquoted equity shares is worked out under Rule 11UA of the Income-tax Rules using the book-value method:

FMV per share = (A minus L) multiplied by (PV divided by PE)

where A is the book value of assets, L is liabilities (with specified exclusions), PV is the paid-up value of the shares being sold, and PE is the total paid-up equity share capital. A registered merchant banker can also value the shares by the discounted cash flow method. Keep the valuation report; the assessing officer can ask for it.

• Treating unlisted shares like listed shares. There is no 1.25 lakh exemption and no 12-month long-term line for unlisted stock. Those belong to Section 112A and STT-paid listed shares only.
• Counting from the grant date for ESOPs. The holding period starts at allotment on exercise, not when the option was granted.
• Ignoring the perquisite already taxed. The FMV taxed in your salary when you exercised ESOPs becomes your cost of acquisition. Forgetting this inflates your gain.
• Selling to a relative at a token price. Section 50CA can still tax you on the full fair value, and Section 56(2)(x) can tax the buyer on the bargain. Both sides can be hit.
• Missing advance tax. Capital gains are not covered by salary TDS. If your tax on the gain crosses 10,000 rupees, pay advance tax or face interest under Sections 234B and 234C.

Meera, a product manager in Pune, exercised startup ESOPs in March 2023 and paid tax on a perquisite value of 8 lakh rupees, which became her cost. In September 2025, after holding the allotted shares for 30 months, she sold them in a secondary sale for 20 lakh rupees.

Her holding crossed 24 months, so the 12 lakh gain (20 lakh minus 8 lakh) was long-term. At 12.5 percent, her tax was 1.5 lakh rupees plus cess. Had she sold in December 2024, before 24 months, the whole 12 lakh would have been added to her income at the 30 percent slab, costing more than 3.6 lakh. Waiting nine months saved her over 2 lakh rupees.

Since 23 July 2024, long-term gains on unlisted shares are taxed at a flat 12.5 percent with no indexation. The older 20 percent with indexation rate applies only to sales made before that date.

More than 24 months. Unlike listed shares, which turn long-term at 12 months, private company and startup shares need a full two years to qualify for the 12.5 percent rate.

No. The 1.25 lakh long-term exemption is only for listed equity shares and equity mutual funds under Section 112A. Unlisted shares are taxed under Section 112 with no such exemption.

Twice, at two stages. First as salary perquisite when you exercise, on the FMV. Then as capital gains when you sell, on the difference between sale price and that same FMV. The perquisite FMV becomes your cost, so it is not taxed again.

The same 12.5 percent long-term or slab short-term rates apply, but the buyer must deduct TDS under Section 195 before paying. An NRI can apply for a lower or nil deduction certificate to avoid excess TDS being locked up until the return is filed.

Section 50CA deems the Rule 11UA fair market value to be your sale price, so your capital gain is computed on the fair value, not the lower amount you received. Get a valuation before any below-market transfer.

ITR-2 if you have no business income, or ITR-3 if you do. Report the gain in Schedule CG, and disclose the shares in the Schedule for unlisted equity holdings, which is mandatory for anyone who held unlisted shares during the year.

• Income-tax Act 1961, Section 112 (long-term capital gains on assets other than listed securities), incometaxindia.gov.in
• Income-tax Act 1961, Section 50CA and Rule 11UA (fair market value of unquoted shares)
• CBDT FAQs on the new capital gains regime, Union Budget 2024-25, Press Information Bureau, pib.gov.in

• How ESOP and RSU shares are taxed in India
• Section 54F: save capital gains tax by buying a house
• Section 54EC bonds to save capital gains tax
• Old vs new tax regime: which to choose
• The RTI Playbook for using information rights when a tax refund or rectification is stuck.