Answer

Startup ecosystem · M&A

Acquisition tax: how an exit is taxed for founders

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  1. Facts

    When a founder sells shares in a Pvt Ltd startup:

  2. Provisions and law

    • IT Act, Sec 45, 48 | Budget 2024 CG rates

  3. Analysis

    LTCG (held 24+ months for unlisted shares): 12.5% without indexation. No ₹1.25L exemption (that's only for listed equity). STCG (held less than 24 months): Taxed at slab rate, up to 30.9%. Cost of acquisition: For founders who got shares for consideration of ₹1, cost = ₹1 per share. For ESOP shares, cost = FMV on exercise date (the perquisite was already taxed). Rollover relief (Sec 86, Income-tax Act 2025, old Sec 54F): If you reinvest LTCG proceeds from a startup exit into a residential house within 2 years, the LTCG is exempt. Max 1 house.

  4. Conclusion

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