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Unlisted equity (shares of private companies, pre-IPO shares) has a different tax treatment from listed equity:
HNI wealth · Unlisted Equity
How unlisted equity gains are taxed: LTCG vs STCG and the 24-month rule
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Provisions
IT Act, Sec 197 (old 112; LTCG unlisted), Sec 196 (old 111A) not applicable
Analysis
LTCG (held 24+ months): 12.5% without indexation, same rate as listed equity from Budget 2024. This is a significant improvement from pre-2024 when unlisted LTCG was taxed at 20% with indexation. STCG (held less than 24 months): Taxed at slab rate (not the 20% flat rate for listed equity). For a 30% slab investor, this means STCG on unlisted shares = 30.9% + surcharge. Much worse than listed equity STCG. Practical implication: Hold unlisted shares for 24 months before selling. The tax difference between selling at 23 months vs 25 months can be enormous, 30.9% vs 12.5%.
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