Capital gains on unlisted shares

Good Luck.          

Unlisted shares have specific rules that differ significantly from listed equity.

HOLDING PERIOD:
- Short-term: held less than 24 months, taxed as STCG at your applicable slab rate (no 15%/20% flat rate for unlisted)
- Long-term: held 24 months or more, taxed at 12.5% without indexation (post-Budget 2024 rate, effective FY 2024-25 onwards)

SECTION 50CA DEEMED CONSIDERATION:
If you sell unlisted shares BELOW their Fair Market Value as per Rule 11UA, the FMV is treated as the deemed sale price. This means:
- Your actual consideration received might be Rs 100 per share
- FMV under Rule 11UA might be Rs 150 per share
- Capital gains are computed on Rs 150, not Rs 100
- The buyer simultaneously has a potential gifting tax issue if the difference exceeds Rs 50,000

FOR STARTUP FOUNDERS SELLING SECONDARY SHARES:
If selling to a new investor at a valuation below the last round (down-round), Section 50CA will deem the old FMV as the sale price. This creates phantom gains, you pay tax on gains you did not receive. The only remedy is negotiating the sale price to at least match the FMV certificate.

FOR RULE 11UA FMV CALCULATION:
For unlisted equity, FMV is determined by a CA or SEBI-registered merchant banker using the net asset value or DCF method. Get the valuation BEFORE signing any share purchase agreement to know your tax exposure.

For the full guide on unlisted share taxation including the ESOP secondary sale angle: taxgarden.in/blog/capital-gains-tax-unlisted-shares-india-ay-2026-27