Trading of shares not listed in stock exchange

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 October 2013 One person has Shares not listed in Stock Exchange in India....How person can Sell this Shares not listed in any Stock Exchange. How to decide Sell Price of Shares in this case. What will be the tax consequences if the gain on sale of shares is going to be Long Term.

@VaibhavJ

@VaibhavJ (Expert)
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17 October 2013 Hi

Pl refer http://taxguru.in/income-tax/valuation-methods-unquoted-shares-56.html

Thanks

Querist : Anonymous

Querist : Anonymous (Querist)

17 October 2013 Thanks...!!

What about taxability of transaction..?? How to sell the shares off market?

Asha Kanta Sharma online

Asha Kanta Sharma online

(Expert)
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02 August 2025 Hey! Here’s a clear breakdown regarding **trading/selling unlisted shares** and their tax implications in India:

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## 1. **How to Sell Shares Not Listed on Stock Exchange?**

* **Unlisted shares** cannot be sold through stock exchanges.
* They are usually sold **off-market** via:

* Private sale agreement between buyer and seller.
* Transfer through **Share Transfer Deed** as per company’s Articles of Association.
* Sometimes through a **stockbroker or through negotiated sale** if buyers are known.
* The company’s **shareholder register** and **Registrar & Transfer Agent (RTA)** will record the transfer after necessary formalities (Board approval, stamping, payment of stamp duty, etc.).

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## 2. **How to Decide the Sale Price?**

* Sale price is **mutually agreed** between buyer and seller.

* Since no market price exists, valuation can be based on:

* Latest financial performance of the company.
* Valuation by a **registered valuer** (especially for tax or regulatory purposes).
* Guidelines issued under **Income Tax Section 56(2)(x)** for transfer of shares at below fair market value.

* If shares are transferred at less than fair market value, the difference may be treated as income in the hands of the recipient (under Section 56(2)(x)).

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## 3. **Tax Consequences on Long-Term Capital Gains (LTCG)**

* Shares held for **more than 24 months** are considered **long-term**.
* **LTCG on unlisted shares** is taxed at **20% with indexation benefit**.
* Indexation adjusts purchase price for inflation, reducing taxable gains.
* Loss from sale of unlisted shares can be set off against LTCG on other long-term capital assets.

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## 4. **Additional Notes**

* Proper **documentation of sale** is crucial (sale deed, transfer forms).
* Stamp duty is applicable on transfer deeds (varies by state).
* If shares are sold below FMV, buyer may have to pay tax on difference under Section 56(2)(x).
* For taxation, **purchase cost and sale price** as documented will be basis for capital gains.

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## Summary Table

| Aspect | Details |
| ------------------- | --------------------------------------------------------- |
| Sale Method | Private agreement, share transfer deed |
| Price Determination | Mutually agreed; valuation by registered valuer if needed |
| Tax on LTCG | 20% with indexation if held >24 months |
| Documentation | Sale deed, transfer forms, Board approval, stamp duty |

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If you want, I can help draft a **sample share transfer deed** or help calculate LTCG with indexation for your case.

Want me to do that?

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