Comparison between Computation and Taxability of Capital Gain of Listed and Unlisted Shares

Last updated: 19 August 2022

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This article breaks down the crucial differences in how capital gains are calculated and taxed for shares listed on stock exchanges versus those that aren't. It highlights variations in definitions, trading methods, Securities Transaction Tax (STT) implications, and the holding periods required to qualify for long-term capital gains. Furthermore, it explains how selling prices are determined, the availability of indexation benefits, and the differing tax rates applicable to both types of shares.

We have always discussed in length about the capital gains and its taxability. But, how many of us have noticed that Computation of capital gain and its taxability is different for listed shares and unlisted shares?

Listed vs Unlisted Shares: Capital Gains Tax Explained

Through this article let us compare both-

Particulars	Listed Shares	Unlisted Shares
Meaning	Shares which are listed in any of the stock exchanges such as National Stock Exchange(NSE) or Bombay Stock Exchange(BSE) are known as Listed Shares.	Unlisted shares are those shares that are not listed in any stock exchange i.e. National Stock Exchange(NSE) or Bombay Stock Exchange(BSE)
Trading	Listed shares are traded in Stock Exchanges.	Shares are traded in the Over the Counter Market. The shares can be purchased and sold through brokers or direct sellers and purchasers
STT	Shares are traded in stock exchanges and therefore, STT is levied	As shares are not traded in Stock Exchanges, no STT is levied.
Classification as Long Term and Short Term	The Listed shares shall be considered as long term if held for a period exceeding 12 months. If the holding period is less than 12 months, then it shall be considered as short term.	The Unlisted shares shall be considered as long term if held for a period exceeding 24 months. If the holding period is less than 24 months, then it shall be considered as short term.
Selling Price for Computation of Capital Gain	The purchase price and selling price is readily available as it is traded in the stock exchange.	For calculation of selling price, first fair market value of the shares sold must be determined. Fair market value is then compared with the actual selling price and higher of the actual selling price and fair market value shall be considered as sale consideration for computation of capital gain. The Fair Market Value is calculated by a Merchant Banker or Chartered Accountant.
Benefit of Indexation	No Benefit of Indexation is provided while computing Capital Gains	Benefit of Indexation is provided while computing Long Term Capital Gains.
Rate of Tax	Long Term Gains are exempt from tax upto Rs. 1 lakh. Any long Term Gain exceeding Rs. 1 lakh is taxable at the rate of 10%. Short Term Capital Gains are taxable at the rate of 15%.	Long Term Capital Gains are taxable at the rate of 20% after indexation and if in case Unlisted shares are held by a non resident, then long term capital gains shall be taxed at the rate of 10% without indexation. Short Term Capital Gains are taxed at slab rates.
Set off and Carried Forward of Losses	Long Term Capital Loss can be set off against Long Term Capital Gain only and Short Term Capital Loss can be set off against Short Term Capital Gain as well As Long Term Capital Gain. Remaining Loss can be carried forward for the next 8 years	Long Term Capital Loss can be set off against Long Term Capital Gain only and Short Term Capital Loss can be set off against Short Term Capital Gain as well As Long Term Capital Gain. Remaining Loss can be carried forward for the next 8 years