New rule for tax on sale of unlisted equity shares

Most of us are aware that listed equity shares are considered

short term capital assets – when sold within 12 months of holding them

long term capital assets – when sold after 12 months of holding them

Short term capital gains from listed equity shares are taxed at 15%. While long term gains are exempt from tax.

But how are unlisted equity shares taxed? Up till FY 2015-16, unlisted equity shares were considered long term when held for more than 36 months. And short term when held for less than 36 months. [Applicable for sales made on or before 31st March 2016.]

 

The tax department has revised this rule via Finance Act, 2016 (passed in Budget, 2016)

 Starting FY 2016-17, UNLISTED equity shares shall be

short term capital assets – when sold within 24 months of holding them

long term capital assets – when sold after 24 months of holding them

[Applicable for sales made on or after 1st April 2016.]

Short term capital gains from unlisted equity shares are taxed at slab rates. While long term gains are taxed @20%.

Note: Worried about how ESOPs are taxed? Read our detailed post here.

 

via amendment to section 2(42A) of the income tax act, effective AY 2017-18(FY2016-17)

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