HOW TO SELL SHARES OF PRIVATE LIMITED COMPANY SOME \ONE HOLDS

Pls post whether listed or unlisted????

UNLISTED SHARES OF PRIVATE LIMITED COMPANY

Selling unlisted shares of a private limited company involves both the legal transfer process and the tax implications for the seller.

Legal transfer process:
1. Check the AOA (Articles of Association) for any right of first refusal - most Pvt Ltd companies require you to offer shares to existing shareholders first before selling to an outsider.
2. Execute Form SH-4 (Share Transfer Deed) signed by both the transferor and transferee. This form is available on the MCA website.
3. Pay stamp duty on the SH-4 at 0.25% of the consideration or fair value, whichever is higher. The stamp duty is on the buyer.
4. Get a board resolution from the company approving the share transfer (unless the AOA allows transfers without board approval, which is rare for Pvt Ltd).
5. The company updates its Register of Members and issues a new share certificate to the buyer.
6. No ROC filing is required just for a share transfer unless it triggers other compliances.

Tax implications for the seller:
- Held for more than 24 months: Long-Term Capital Gain (LTCG) at 20% with indexation (for shares acquired before July 23, 2024). Held 24 months or less: Short-Term Capital Gain (STCG) at applicable slab rate.
- The full value of consideration for tax purposes cannot be less than the FMV of the shares on the date of transfer (Section 50CA applies).
- Get a valuation from a registered valuer if the sale is to a non-family outsider, to avoid the deemed FMV rule creating a higher than expected tax liability.

This [capital gains tax on unlisted shares guide for AY 2026-27](https://taxgarden.in/blog/capital-gains-tax-unlisted-shares-india-ay-2026-27) covers the Section 50CA deemed FMV rule, holding period computation, and the tax rate table in detail.

Selling unlisted private limited shares requires checking the Articles of Association (Right of First Refusal), executing Form SH-4 with 0.25% stamp duty, obtaining board approval, and updating the company's Register of Members. From a tax standpoint, holding shares for over 24 months attracts an LTCG tax of 12.5% (without indexation), while holding them for 24 months or less attracts STCG taxed at individual slab rates, with Section 50CA mandating that sale prices cannot fall below the certified Fair Market Value.

Shares held in an individual’s name may generally be transferred by executing the prescribed share-transfer instrument and completing the company’s procedural requirements. The precise process depends on whether the shares are held in physical or demat form, the company’s articles, and any shareholders’ agreement or transfer restrictions.

• For physical shares, execute Form SH-4, pay applicable stamp duty, and deliver it with the share certificates to the company within the prescribed period.
• For demat shares, submit a delivery instruction through the depository participant; the company’s articles and any contractual restrictions still need to be checked.
• Obtain the company’s registration of the transfer and update the register of members. Consideration, holding period, cost and the nature of the transfer affect tax treatment.
• If “dispose” means sale, gift, transmission or transfer to another existing shareholder, confirm which applies; the steps and tax consequences differ.

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