Sale of Unlisted Shares after its get Listed

Hi Bhavesh,

Here's the analysis based on your scenario of sale of shares that were initially unlisted but got listed later:

1. Indexation benefit applicability:

• The Finance Act 2018 introduced Section 112A which applies to long-term capital gains (LTCG) on listed equity shares and equity-oriented mutual funds.

• Under Section 112A, indexation benefit is NOT allowed for listed shares sold after January 31, 2018.

• However, for unlisted shares sold before 01.02.2018, indexation benefit was allowed under Section 112 at 20%.

• In your case, the shares were originally unlisted when acquired, but they became listed only when sold.

• As per CBDT clarification and judicial precedents, the cost of acquisition for shares that became listed will be the actual cost (without indexation), because the sale is on listed shares after 01.02.2018.

• Therefore, indexation benefit is not allowed while computing LTCG on sale of these shares after listing.

2. Tax rate applicable:

• For listed shares sold on stock exchange with STT paid, gains are subject to Section 112A.

• LTCG exceeding ₹1 lakh is taxable at 10% without indexation.

• So, 10% tax rate applies on LTCG exceeding ₹1 lakh on sale of these shares.

3. Where to show in ITR:

• Report this under Schedule CG - Capital Gains.

• Since it falls under Section 112A, you should show the transaction in the "Long Term Capital Gains under Section 112A" section of ITR (such as ITR-2 or ITR-3).

Summary:

If needed, you can calculate LTCG as:

LTCG = Sale Price - Cost of Acquisition (without indexation) - ₹1 lakh exemption