Capital Gains Tax on IPO & Unlisted Shares 2026

For many years, the purchase of IPOs and unlisted stocks was a part of my investment strategy, and, to be honest, the whole aspect of taxation was something I really wished to get a clearer picture of from the very beginning. Several investors I know do not even consider the tax consequences of IPO applications or unlisted share purchases and jump right into them. If you are the one selling shares immediately after the listing, keeping unlisted shares for several years, or just being puzzled about what will be the fate of those unlisted shares once they are eventually listed, then you have to be aware of the tax on IPO profits and unlisted shares taxation rules.

I’ll guide you through everything step by step and in a very casual manner, as if I were telling it to a mate over a cup of coffee.

Understanding Capital Assets and Capital Gains

Before getting into the details, let me first describe what capital assets are, for this is the basis for the rest of the discussion.

According to the Income Tax Act, shares and securities are classified as capital assets. The sale and purchase of these assets result in capital gains, which are taxed. Understanding financial analysis helps you evaluate these capital assets more effectively beyond just their tax implications.

Now this is where things become really attractive. The tax you are liable to pay is primarily influenced by two factors: 

First, it is a matter of whether your shares are listed or unlisted. Listed shares are the ones traded in open marketplaces like NSE or BSE, while unlisted ones are the shares of private firms that are not yet open for public trading. The tax implications for the difference between listed and unlisted equity securities are significant. 

From my point of view, a large number of taxpayers are unaware of the fact that the same share could be handled differently for tax purposes depending on the date of purchase and sale. This is a particularly critical aspect when it comes to unlisted shares that eventually go public via an IPO.

Taxation on IPO Listing Gains

To begin with, I will talk about the one thing that really makes every IPO investor ecstatic: listing gains. Don’t you feel that thrill when you look at your phone on listing day and notice that your shares have been sold and traded at a higher price? That gain is what we refer to as listing gains.

What Are Listing Gains in an IPO?

Listing gains represent the income generated by selling your shares allocated during the new issue on the offering day or soon after it. To illustrate, if you received shares worth ₹100 in an IPO and they are quoted at ₹150 on the day of offering, then the gain is ₹50 for one share.

How to Calculate Listing Gains

The calculation is straightforward:

Listing Gain = (Selling Price on Listing - IPO Application Price) × Number of Shares

Assume that you made an application for 100 shares at the rate of ₹200 in an IPO. All 100 shares are allotted to you. The opening price of the shares is ₹280 on the listing day, and you sell them right away. Your listing gain would be:

(₹280 - ₹200) × 100 = ₹8,000

Tax on IPO Listing Gains

Many people find this very surprising. Because you are going to sell these stocks almost at once after receiving them (for sure within a year), these profits are classified as short-term capital gains. Moreover, according to the new tax rules effective from July 23, 2024, the tax on IPO gain will be 20%.

In the past, the short-term capital gain tax on IPO was charged according to the income tax slab of the taxpayer, which could go up to 30% for those in the highest bracket. The new flat rate of 20% is actually a win-win situation for investors with high incomes.

So in our example above, the tax on your ₹8,000 listing gain would be ₹1,600 (20% of ₹8,000).

What Affects IPO Listing Prices

Several factors have been influencing the performance of the IPO on the listing day,y which I have noticed. Naturally, the company's fundamentals are the most important ones, but the mood of the market is a decisive factor too. Bull markets usually have days with more significant listing gains. It is also true that the sector trends affect the price of the listings when the tech sector is hot, tech IPOs are always catching higher premiums.

Another point is the Grey Market Premium or GMP. This is an unofficial measure of how much people are willing to pay for the shares before they are officially available for sale. Although GMP is not always spot on, it does provide a rough idea of what the market expects.

In the case of shares that are not listed on the stock exchange, a registered valuer usually employs valuation techniques such as discounted cash flow or comparable company analysis to arrive at the FMV. This is important as the FMV becomes your acquisition cost for tax calculations.

Complete Guide to Unlisted Shares Taxation

Once you reach unlisted shares, things start to get extremely interesting, and this is one sector where you would see a great deal of confusion amongst investors.

What Are Unlisted Shares

Unlisted shares refer to the equity shares of companies that are not listed on any stock exchange. These are usually shares of private companies, startups, or companies that are about to go public. Investors can purchase these shares via private placements, from existing shareholders, or through specific platforms.

Before IPO: Taxation During the Unlisted Phase

Once shares are still unlisted, their taxation is dependent on the time for which you have held them.

Long-Term Capital Gain Tax on Unlisted Shares

In the case of unlisted stocks, they must be kept for more than two years (24 months) before they can be considered long-term. This is not the same as for listed stocks, which only need one year. 

Budget 2024 is where the big change took place. The long-term capital gain tax on unlisted shares became 12.5% without the indexation benefit, which is now the new tax rate. 

I will give you an example to clarify. Imagine that in January 2022, you purchased ₹5,00,000 worth of unlisted shares from a startup that had great potential. You sold them for ₹10,00,000 in March 2025 (after 24 months). The amount of your long-term capital gain would be:

₹10,00,000 - ₹5,00,000 = ₹5,00,000

Tax = 12.5% of ₹5,00,000 = ₹62,500

Your gain subjected to tax, might have been lower with the previous indexing system (taking into account a cost inflation index benefit); nevertheless, the tax rate would be 20%. The contemporary system relinquishes the indexation benefit in exchange for easier administration.

Short-Term Capital Gain Tax on Unlisted Shares

When it comes to unlisted stocks, the gain made during the first two years after purchasing will be treated as a short-term capital gain. 

The tax applicable on the short-term capital gains from unlisted shares will be the same as the income tax slab rates, depending on your total income, either 10%, 15%, 20%, or 30%.

Actually, it could be a pretty heavy burden for a person taking advantage of the 30% tax bracket. Therefore, most of the investors prefer to sell their unlisted shares only to be certain that at least two years or even more have gone by.

Fair Market Value for Unlisted Shares

A challenging factor that comes with unlisted shares is their valuation, particularly when they are given as a gift or inherited. Fair Market Value (FMV) is the value the tax authority takes into account for this scenario.

In the case of shares that are not listed on the stock exchange, a registered valuer usually employs techniques such as discounted cash flow or comparable company analysis to arrive at the FMV. This is important as the FMV becomes your acquisition cost for tax calculation.s

After IPO: When Unlisted Shares Get Listed

So it is something interesting. What happens to unlisted shares when a company goes for its public offering?

Understanding Lock-in Periods

I've observed that a lot of people are not aware of the fact that even if a company goes public, it does not mean that you can instantly sell your unlisted shares. Generally, there is a lock-up period.

• Lock-in periods can differ according to the profile of a person:

• Usually, promoters and founders are subjected to a 3-year lock-in from the listing date 

• Pre-IPO investors who acquired shares within the preceding year generally experience a 1-year lock-in

• IPO anchor investors are subject to a 90-day lock-in

• Retail and other public IPO investors are allowed to sell immediately upon listing

The lock-in is meant to prevent sudden selling pressure that could crash the stock price right after listing.

How to Sell After Lock-in Expires

After the end of your lock-in period, your shares get converted to tradable shares automatically. They will be in your demat account no longer marked with the lock-in tag. You can then sell them via your broker in the same manner as any other listed share.

Taxation During the Transition from Unlisted to Listed

Most of the people I have talked with are confused about this issue. When your shares that are not listed get listed, is the holding period that you had previously for them reset? Are you starting to count from the beginning?

The good news is that your holding period is not reset. The date of your original purchase of the unlisted shares is the same as your acquisition date.

In case you had unlisted stocks for one year and eight months and then they were listed, you would have to hold them for just four more months (making it two years from the original purchase) to be eligible for long-term capital gains treatment for unlisted stocks. However, do not forget that you are still under the lock-in period, thus you are not allowed to sell during this time.

When the lock-in period is over and if you sell after passing 12 months from the date of listing, then your profits will be classified as long-term capital gains on listed shares with the long-term capital gain tax on shares rate of 12.5% on gains over ₹1.25 lakh per year.

Cost of Acquisition

When a company goes public, your acquisition cost continues to be your initial investment in the unlisted stocks. This remains constant and has a significant impact on the computation of your real capital gains when you decide to sell.

Listed Shares Capital Gains

Listed shares' capital gainshelps to boost  efficiency while companies are in profit and loss, also in terms of equity shares :  

Long-Term Capital Gain Tax on Shares

In the case of publicly traded equity shares, the time span allowed for long-term categorization is one year. This is considerably less than the two-year requirement for non-listed shares.

To illustrate my point, let's take the case above. If you had purchased shares worth ₹3,00,000 that were listed in April 2023 and then sold them for ₹6,00,000 in May 2024, your holding period would have been over 12 months, making it long-term.

Your capital gain: ₹6,00,000 - ₹3,00,000 = ₹3,00,000

Exemption: ₹1,25,000

Taxable gain: ₹3,00,000 - ₹1,25,000 = ₹1,75,000

Tax = 12.5% of ₹1,75,000 = ₹21,875

The annual limit for this exemption is set at ₹1.25 lakh, which means that if there are more than one transaction, they can all be adjusted against this single exemption of ₹1.25 lakh.

Short-Term Capital Gain Tax on Shares

If you dispose of listed stocks within a year of purchasing them, then it is termed as short-term. The taxation for short-term capital gains on listed shares is 20% flat, irrespective of the individual’s income slab. This was increased from the previous 15% rate as stated in the Budget 2024 revisions.

A vital issue: The preferential tax rates (short-term and long-term) require that Securities Transaction Tax (STT) be paid on both buying and selling. If there were no STT payment, the profits are considered taxable according to the respective income tax slab rates.

Capital Gains Tax on Mutual Funds

I should briefly cover it, as many investors do have more mutual fund investments than direct equity investments.

Equity-Oriented Mutual Funds Taxation

The taxation of long-term capital gains on mutual fund investments is subject to the same regulations as that of listed shares. If equity mutual fund units are held for more than 12 months, the tax rate of 12.5% is applicable on the gains exceeding ₹1.25 lakhs.

On the other hand, capital gains on units held for a shorter period are taxed as short-term capital gains at the rate of 20%.

An investment in mutual funds can be considered "equity-oriented" if at least 65% of its portfolio is invested in Indian equities.

Debt mutual funds have diverse taxation rules, and their income tax slab is considered no matter the duration of the holding period.

Typically, new investors are not aware that moving between mutual fund schemes of the same fund house constitutes a taxable event. It is considered as selling and buying, thus, capital gains tax is applicable.

Tax Treatment of Gains and Losses

No desire can harm even a farthing if one observes it and releases oneself from it.

Setting Off Capital Losses

Losses can be adjusted against gains under certain tax rules to reduce the taxpayer's tax burden.

Short-Term Capital Loss Set-Off

Losses from short-term capital can be used to reduce both short-term and long-term capital gains in the same fiscal period. This was a rather nice and convenient feature.

Let’s say you earned ₹50,000 on one IPO and at the same time your other IPO lost ₹20,000, then the profits can be balanced out. Your total taxable short-term capital gain will be ₹30,000.

Long-Term Capital Loss Set-Off

Losses from short-term capital can be used to reduce both short-term and long-term capital gains in the same fiscal period. This was a rather nice and convenient feature.

Let’s say you earned ₹50,000 on one IPO and at the same time your other IPO lost ₹20,000, then the profits can be balanced out. Your total taxable short-term capital gain will be ₹30,000.

Treatment of Loss on IPO Listing

An IPO that gets listed at a price less than its issue and on such day you sell and incur a loss, then this kind of loss is considered a short-term capital loss. It is allowed to be adjusted against other capital gains during the same taxation year.

Carry Forward of Losses

Here's a great tip - in case you cannot fully utilize your capital losses this year, you can carry them forward for 8 years. You can use them against capital gains in any of those years.

But to carry forward losses, it is mandatory to file your income tax return by the due date (generally July 31st). If you happen to miss this deadline, you will not be able to carry over these losses anymore.

Special Scenarios

Gifted Shares

In case you get stock as a present from a family member (as per the Income Tax Act), it is not taxed at the time of getting it. When you sell these stocks, the duration of your ownership begins from the date the original possessor bought them and not from the time you got the present. The amount you paid for the stock is the cost that the original owner incurred.

Inherited Shares

Shares that are inherited as a result of death are subjected to similar rules. The period of the previous owner's holding is attached to yours. Your investment's basis is the purchase price of the previous owner, and not the market value at the time of the inheritance.

Bonus and Rights Shares

As for bonus shares (free shares that are given based on the number of shares you already own), the cost of acquisition is treated as zero, but the holding period begins with the receipt of the bonus shares and not the purchase of the original shares.

Rights shares (in which you are given the option to buy new shares at a lower price) are assigned a cost and a holding period that begins at the time you subscribe to them.

Employee Stock Options (ESOPs)

In case your firm decides to go public, and you have ESOPs, then the whole taxation matter becomes quite intricate. Upon exercising the ESOPs, the amount between the fair market value and your paying price becomes taxable as salary income (perquisite). After that, when you dispose of those stocks, any additional profit will be classified as capital gains.

How to Report IPO and Unlisted Shares in ITR

It is very important to file your tax return correctly,y as I have myself made mistakes here before, and it is not fun when the tax department sends notices.

Which ITR Form to Use

ITR-2 is the appropriate form for almost all salaried individuals who have capital gains from stocks. ITR-3 is the required form if business or professional income is received.

If there are capital gains from the sale of shares or mutual funds, ITR-1 (Sahaj) cannot be loaded even if the salary is the main source of income.

Step-by-Step Guide to Schedule CG

1. The Schedule CG (Capital Gains) is the section of the tax return where all your share transactions are to be disclosed. Let me explain the process to you:

2. Firstly, the short-term capital gains obtained from selling the listed shares go under the section "Short Term on Listed Securities,, es where STT is paid.

3. Secondly, the long-term capital gains from listed shares that are over ₹1.25 lakh go in the section "Long Term Capital Gains - 112A".

4. Thirdly, the long-term capital gains on unlisted shares go in section "Long Term Capital Gains - 112".

5. Fourthly, short-term capital gains on unlisted shares, which are taxed at the slab rate, will have to be reported in a separate section

For each transaction, you need to provide:

• Date of the transaction: purchase and sale

• Quantity of shares

• Acquisition price (cost of acquisition)

• Disposal price

• Cost incurred (brokerage, etc.)

• ISIN (International Securities Identification Number)

Here's a simple visual guide to understand where each type of gain goes in your ITR:

This breakdown makes it much easier to categorize your transactions when filling out the ITR form.

Information Required: ISIN, FMV, and More

The ISIN is an exclusive identifier for every security. You can see this for the listed stocks in your contract notes or through your demat account statement. In the case of unlisted shares, ISIN may not be accessible at all times, and you can then say "Not Applicable."

Fair Market Value is a key factor when the shares that were gifted or inherited are sold or in a few transition scenarios.

Key Changes in ITR Forms

ITR forms are continuously modified by the tax authorities. The new tax rates from Budget 2024 have already been incorporated in the forms for Assessment Year 2025-26 (Financial Year 2024-25). Always verify that you have the current version of the form.

If numbers are not a big deal for you, then platforms like Dhanarthi.com with their financial statement analysis features can assist you in keeping your investment records well organized, thereby facilitating tax filing.

Common Mistakes to Avoid

The answer to this is that it is usually a mixture of both passive reasons and failures on our parts.

1. Not disclosing minor profits under the assumption that they are below the exemption limit.

2. Determining the period of holding by mixing the purchase date with the demat credit date of shares

3. Not taking advantage of the ₹1.25 lakh exemption on long-term capital gains.

4. Not declaring trades if you have a net loss.s

5. Filing with the incorrect ITR form (using ITR-1 when you have capital gains)

Remember, all transactions must be reported, even if the net result is a loss or below taxable limits. The tax department receives data directly from stock exchanges and depositories, so they know about your trades.

Important Deadlines and Reminders

Here’s the Deadline and remainder for filing the ITR, which has been described below:  

Keeping track of these dates can save you from penalties, interest charges, and losing valuable tax benefits.

Tax Planning Strategies

I hope you have some quality experience in the stock market. Effective tax planning should be an integral part of your overall investment strategy.

How to Minimize Tax on IPO Profits

One efficient approach that I have personally witnessed is the process of staggering your exits. Suppose you have shares in several outstanding IPOs that have already been sold at a premium; if so, think about getting rid of a portion in one financial year and then the remaining ones in the following year. This method allows you to benefit from the ₹1.25 lakh exemption during more than one year, provided you can hold it long-term.

Timing Your Sale for Optimal Taxation

There is a great difference in tax treatment at the 12-month and 24-month points. If you are near these limits, then delaying a little bit can lead to a great reduction in your tax.

As an example, if you have been holding listed shares for 11 months and have made a good profit, one more month's wait will change the tax from 20% short-term capital gains tax to 12.5% long-term capital gains tax (with the ₹1.25 lakh exemption as well).

Likewise, for unlisted shares, reaching the 24-month mark can give you a great advantage.

Can You Avoid Lock-in for Unlisted Shares After IPO?

Regrettably, it is a no. Lock-in periods are regulatory requirements, and there is no legal way to avoid them. Their purpose is to prevent retail investors from being affected by sudden price crashes that may result from the massive selling of pre-IPO shareholders.

In spite of this, knowing when your lock-in period is over and strategizing your sale in accordance with it can facilitate tax planning. Make a note of the time when the lock-in period is over and decide whether you want to sell right away or keep your investment for a longer time.

Using Exemptions Under Sections 54, 54F, and 54EC

It's a fact not widely known that you can avoid paying long-term capital gains tax if you invest the money in the prescribed way:

Investing in the capital gains in the specified bonds like NHAI or REC under Section 54EC, then the exemption is allowed. The investment of up to ₹50 lakh is permissible,e and these bonds come with a 5-year lock-in.

On the other hand, Section 54F allows exemption if you spend the entire amount received from the sale of the property on buying or constructing a new residential house. However, this limitation does not apply only if you own one house property (excluding the new one being constructed).

These exemptions are favorable even for large gains but are subject to the conditions and the lock-in period.

Adjusting Capital Gains Against Basic Exemption Limit

Here’s a tiny and very practical tip. If your total income (capital gains included) is under the basic exemption limit (₹2.5 lakh, ₹3 lakh for senior citizens, ₹5 lakh for super senior citizens), you are not liable to pay any taxes.

Among the tax-exempt retired investors are those who manage to sell their stocks and make only the required amount of capital gains to be within the exemption limit, thus not paying any taxes at all.

Comparative Analysis

The above should consolidate most of what has been said so far into a simple comparison, so that they may stand clear.

Listed vs Unlisted Shares: Complete Taxation Comparison

Holding Period Required:

• Listed Shares: 12 months long-term

• Unlisted Shares: 24 months long-term

Long-Term Capital Gains Tax:

• Guardians of the listed shares will have to pay 12.5% on the gains over ₹1.25 lakh, while unlisted shares bear the same 12.5% tax on the complete gain without any basic exemption.

Short-Term Capital Gains Tax:

• Listed Shares: 20% flat (where STT paid)

• Unlisted Shares: As per the income tax slab (10% to 30%)

Indexation Benefit:

• Listed Shares: Not available

• Unlisted Shares: Not available anymore (changed in Budget 2024)

Liquidity:

• Listed Shares: Can be sold anytime during market hours

• Unlisted Shares: Need to find buyers, limited liquidity

IPO Listing Gains vs Long-Term Equity Gains

Selling shares on the IPO listing day entails taxation of 20% against all the profit made. However, if the same shares are maintained for a period of one year, the first ₹1.25 lakh of profit would be tax-free, while the rest would be taxed at a lower rate of 12.5%. 

For instance, if you made a profit of ₹2 lakh on the IPO listing day, the tax liability would be ₹40,000 (20% of the entire gain of ₹2,00,000).

In a case where you were patient and the profit remained at ₹2 lakh after 12+ months, tax would be ₹9,375 (12.5% of ₹75,000, since the ₹1.25 lakh exemption is already deducted).

This is indeed a large gap! But then again, the holding period comes with risk as the stock price could drop during that time. Thus, stock analysis fundamentals become crucial at this stage. You must decide if the company is worth the long-term holding.

Short-Term vs Long-Term: Which is Better?

In terms of taxation only, long-term is practically always the best option. For the same reason, one enjoys lower rates and exemptions and has simpler calculations.

But one should not forget about the long-term tax benefit in investment decisions. If a stock price has significantly increased and its fundamentals are getting worse, it may be wise to realize profits even though paying short-term capital gains tax.

I have this personal rule of thumb: Let tax considerations be the tiebreaker, not the primary decision driver. First, judge the investment on its merits. If you are not sure whether to keep it or sell it, then consider the tax consequences to arrive at the final decision.

Quick Reference: Tax Rates Comparison Table

Let me give you a simple table that you can bookmark for quick reference whenever you're planning to sell shares:

This table makes it super easy to understand what you'll owe in taxes based on what you're selling and how long you've held it.

Holding Period Comparison: Listed vs Unlisted

Here's another visual that helps you understand the timeline differences:

As you can see, if you hold unlisted shares for 15 months, they're still short-term for tax purposes, while listed shares would already qualify for the lower long-term rate. This is why timing matters so much.

Practical Examples and Case Studies

Uncle Sam taking his share of your money is always a difficult thing to understand, and the best way to learn how taxes work is through practical examples.

 Two or three situations will be presented in this article, one or more of which I either saw or assisted others in overcoming.

Example 1: IPO Listing Gain Calculation and Tax

Scenario: Uncle Sam taking his share of your money is always a difficult thing to understand, and the best way to learn how taxes work is through practical examples. Two or three situations will be presented in this article, one or more of which I either saw or assisted others in overcoming.

Calculation:

• Cost of acquisition: 50 shares × ₹180 = ₹9,000

• Sale value: 50 shares × ₹250 = ₹12,500

• Short-term capital gain: ₹12,500 - ₹9,000 = ₹3,500

• Tax at 20%: ₹3,500 × 20% = ₹700

Rajesh needs to pay ₹700 as tax on his listing gain. He'll report this in Schedule CG of his ITR-2.

Example 2: Unlisted Shares Sold Before IPO

Scenario: In January 2021, Priya invested ₹2,00,000 in the unlisted shares of a startup. Though the company was planning to go public, it was taking its sweet time. After 38 months, in March 2024, she sold her unlisted shares to another investor for ₹6,00,000.

Calculation:

• Holding period: 38 months (more than 24 months, so long-term)

• Cost of acquisition: ₹2,00,000

• Sale value: ₹6,00,000

• Long-term capital gain: ₹6,00,000 - ₹2,00,000 = ₹4,00,000

• Tax at 12.5%: ₹4,00,000 × 12.5% = ₹50,000

Priya pays ₹50,000 as long-term capital gains tax. Note that since these are unlisted shares, she doesn't get the ₹1.25 lakh exemption available for listed shares.

Example 3: Unlisted Shares Sold After Listing (Post Lock-in)

Scenario: Amit invested in the unlisted shares of a company with great potential in June 2022 for a sum of ₹5,00,000. The firm held its IPO in August 2023. Amit, being a pre-IPO investor, got a 1-year lock-in period from the listing day. In September 2024 (after the expiration of the lock-in period), he disposed of these shares,s which are now listed for ₹9,00,000.

Calculation:

• Original purchase: June 2022

• Selling date: September 2024

• Total holding period: 27 months (more than 24 months from original unlisted purchase)

• Time from listing to sale: 13 months (more than 12 months, so treated as listed long-term)

Due to surpassing 24 months that the holding period from the original purchase has surpassed 24 months, along with the more than 12 months that the shares have been listed for, this is considered long-term capital gains on listed shares.

• Cost of acquisition: ₹5,00,000

• Sale value: ₹9,00,000

• Long-term capital gain: ₹9,00,000 - ₹5,00,000 = ₹4,00,000

• Exemption: ₹1,25,000

• Taxable gain: ₹4,00,000 - ₹1,25,000 = ₹2,75,000

• Tax at 12.5%: ₹2,75,000 × 12.5% = ₹34,375

Amit's tax liability is ₹34,375. Observe how advantageous it would be to continue holding the shares through the IPO and even beyond the lock-in period if the company is successful.

Example 4: Loss Scenario and Set-Off

Scenario: Neha invested in two IPOs in the same year. Understanding different loss scenarios helps investors plan their tax strategy more effectively.

• IPO A: Bought 100 shares at ₹300, sold at ₹450 on listing day

• Gain: (₹450 - ₹300) × 100 = ₹15,000

• IPO B: Bought 75 shares at ₹400, sold at ₹350 on listing day

• Loss: (₹350 - ₹400) × 75 = -₹3,750

She has also sold some shares, which were held for 2 years, involving long-term capital gains of ₹2,00,000.

Calculation:

• Net short-term capital gain: ₹15,000 - ₹3,750 = ₹11,250

• Tax on short-term gain at 20%: ₹11,250 × 20% = ₹2,250

• Long-term capital gain: ₹2,00,000

• Exemption: ₹1,25,000

• Taxable long-term gain: ₹75,000

• Tax at 12.5%: ₹75,000 × 12.5% = ₹9,375

• Total tax: ₹2,250 + ₹9,375 = ₹11,625

Observe that the short-term capital loss resulting from IPO B was able to negate her short-term gain resulting from IPO A, thereby lessening her tax obligation. The short-term loss could not be applied against long-term gains.

Real-Life Scenario: Complete Tax Breakdown

Let me show you a comprehensive year-end scenario that many investors face:

Calculation: STCG net = ₹40,000 - ₹30,000 = ₹10,000 × 20% = ₹2,000. LTCG = ₹9,375. Unlisted LTCG = ₹18,750. Total = ₹30,125

This table shows how different transactions in a year get calculated separately and then consolidated for the final tax payment.

Conclusion

Investing that brings success is not only about stock selections or market timing but also about being aware of the tax consequences and doing proper tax planning. The amount of money that is saved through taxes is the same amount that can be invested to earn compounded returns.

However, always making sound investment choices first and doing tax planning as a necessary second step is the way to go.

If you encounter any scenarios that are not addressed here, or if changes in tax laws occur, please feel free to reach out to a certified public accountant or tax advisor who can give you tailored assistance based on your entire financial situation.

Quick Tax Calculator Reference

Before I wrap up, here's a simple way to quickly estimate your tax liability:

This table gives you a quick sense of what you might owe. Remember, these are approximate calculations; your actual tax might vary based on your complete income profile and other factors.

I hope this guide helps you navigate the taxation maze around IPOs and unlisted shares. Invest wisely, plan your taxes smartly, and happy investing!

Disclaimer: This article is for educational purposes only and should not be considered as financial or tax advice. Tax laws are subject to change, and individual circumstances vary. Please consult with a qualified chartered accountant or tax advisor for personalized guidance based on your specific situation.

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