Taxation of Listed and Unlisted Shares in India for FY25
As the deadline for filing Income Tax Returns (ITR) for FY25 approaches, investors in India need to understand how capital gains from listed and unlisted shares are taxed. This guide explains the intricacies of share taxation, including tax rates, holding periods, and relevant judicial rulings.
Taxation of Listed Shares
Capital Gains Classification:
- Long-Term Capital Gains (LTCG): Gains from shares held for more than 12 months.
- Short-Term Capital Gains (STCG): Gains from shares held for 12 months or less.
Tax Rates:
- STCG (Section 111A): 15% tax rate, provided the transaction is subject to Securities Transaction Tax (STT).
- LTCG (Section 112A): 10% tax rate on gains exceeding Rs. 1 lakh per financial year, without indexation. The grandfathering benefit applies if shares were acquired up to January 31, 2018.
- Non-STT Transactions: If STT is not levied, STCG is taxed at the marginal slab rates of the investor. LTCG is taxed at either 20% with indexation or 10% without indexation, whichever is more beneficial (Section 112).
Taxation of Unlisted Shares
Capital Gains Classification:
- Long-Term Capital Gains (LTCG): Gains from shares held for more than 24 months.
- Short-Term Capital Gains (STCG): Gains from shares held for 24 months or less.
Tax Rates:
- LTCG (Section 112): 20% with indexation benefits for resident investors.
- STCG: Taxed according to the applicable slab rate of the investor.
Judicial Rulings and Implications
Bombay High Court Ruling (Jai Trust vs. Union of India):
- The court clarified the tax treatment of capital gains from gifted shares, impacting wealth transfer strategies.
Key Considerations for Investors
- Taxation on Gifts and Airdrops: Gifts or airdrops of shares exceeding INR 50,000 are taxed at a flat rate of 30%.
- Mining and DeFi Transactions: Income from mining is treated as business income, and gains from selling mined crypto are taxed at 30%.
- Non-Fungible Tokens (NFTs): Profits from NFT sales are taxed at 30%.
Practical Tips
- Consolidate Transactions: Ensure accurate reporting by consolidating transactions across different exchanges.
- Seek Expert Advice: Professional guidance can help navigate complex tax regulations and ensure compliance.
Summary of Tax Rates
| Type of Shares | Type of Gain | Applicable Section | Tax Rate |
|---|---|---|---|
| Listed Shares | LTCG (held > 12 months) | Section 112A | 10% above Rs. 1,00,000 (Without Indexation) |
| Section 112 | 10% (Without Indexation) or 20% (With Indexation) | ||
| STCG (held ≤ 12 months) | Section 111A | 15% (Subject to STT) | |
| Marginal Slab Rates (Non-STT) | |||
| Unlisted Shares | LTCG (held > 24 months) | Section 112 | 20% (With Indexation) |
| STCG (held ≤ 24 months) | Applicable Slab Rates |
