2 min read.Updated: 12 Oct 2021, 04:12 PM ISTLivemint
If the shares are not listed on a recognized stock exchange in India, concessional rates shall not apply. Period of holding will be 24 months instead of 12 months for treating such gains as LTCG
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I had purchased shares of an unlisted European company A in 2018 August. Company A had share purchase agreement with another company B in October 2020 and I was allotted shares of company B, which was a listed company. I want to know if I sell my shares now in August 2021 (3 years after date of initial purchase), how much tax will I have to pay in India. I am an Indian resident. Also, I was allotted shares of an unlisted company C (this too is European) in December 2018 as I was its founding member. Company C has gone for IPO in 2021. How much tax I have to pay if I sell shares in December 2021?
At the outset, this query involves detailed examination of relevant facts, which are not clear from the query. To name a few, it's not clear whether Company B is listed in an Indian stock exchange or outside India, what was the exact mechanics of exchange of shares of Company A for shares of Company B, whether STT is paid at the time of transfer of shares of Company B etc.
Generally speaking, if shares of a company listed on an Indian recognized stock exchange are sold where STT has been paid at the time of acquisition and also at the time of sale of such shares and the shares are held for a period of more than 12 months, gains arising from such sale of shares is classified as long-term capital gain (LTCG), which is taxable at 10%.
In case such shares are held for a period of less than 12 months, such short-term capital gains (STCG) from transfer of shares shall be subjected to tax at 15%. The tax is further increased by applicable surcharge and cess.
If such shares are not listed on a recognized stock exchange in India, above-mentioned concessional rates shall not apply. Period of holding will be 24 months instead of 12 months for treating such gains as LTCG. In this case, LTCG will be calculated after considering the benefit of indexation and will be taxed at 20% (plus applicable surcharge and cess). Where shares are held for a period less than 24 months, difference between sale and purchase price shall be taxed at normal slab rates (plus applicable surcharge and cess).
It may be advisable to seek professional opinion after providing all necessary and relevant facts, to determine tax liability in this case.
Answered by Shailesh Kumar, Partner, Nangia & Co LLP. Send your queries to email@example.com