Moment guide · FY 2026-27

I am selling unlisted shares

What is the capital gains tax rate on unlisted shares?

Sec 112Sec 17(2)(vi)Sec 192(1C)Sec 48Verified 2026-08-11

Unlisted shares held over 24 months are long-term and taxed at 12.5% with no indexation and no ₹1.25 lakh exemption — that exemption belongs only to listed equity under section 112A. Short-term gains within 24 months are at slab. For ESOPs, the vesting perquisite under section 17(2)(vi) and the later sale gain are two separate tax events, with eligible startup employees able to defer the perquisite up to 48 months.

Your legitimate options

Every route the statute actually gives you — with its condition, cap and deadline.

Route	Condition	Cap / deadline
LTCG above 24 months	Held more than 24 months — taxed at 12.5% with no indexation after FA 2024	NO ₹1.25L exemption — that is only for listed 112A shares
STCG up to 24 months	Held 24 months or less — taxed at slab rate	Slab rate applies
ESOP shares from your company	Vesting/exercise creates a perquisite u/s 17(2)(vi) at FMV minus price paid; later sale uses that FMV as cost	Eligible 80-IAC startup employees can defer the perquisite up to 48 months u/s 192(1C)

The #1 trap

Assuming the ₹1.25 lakh exemption applies to unlisted shares — it is available only for listed equity under section 112A, while unlisted shares follow section 112 at 12.5% with no exemption slab and no indexation after FA 2024. The ESOP trap: the perquisite at vesting and the gain at sale are two separate taxable events with two different rates.

The decision path

Follow it top to bottom — the first condition that matches is your answer.

IF you held unlisted shares more than 24 months → LTCG at 12.5%, no indexation (FA 2024), no ₹1.25L exemption.
IF you held them 24 months or less → STCG at your slab rate.
IF the shares came from an ESOP → the vesting perquisite u/s 17(2)(vi) is salary; the sale gain uses the FMV already taxed as cost.
IF you work for an eligible 80-IAC startup → the perquisite can be deferred to the earliest of sale, exit or 48 months u/s 192(1C).
IF you sold after a funding round at a higher valuation → the buyer's consideration is the sale price; no notional FMV is used. [VERDICT: two events, two rates — and no 112A exemption for unlisted.]

Worked example

Vivek, startup employee selling his ESOP shares

Vivek works at a private startup and exercised 2,000 ESOP shares in 2022 at a strike price of ₹10 per share when the FMV was ₹50 per share. At exercise, the perquisite under section 17(2)(vi) is the difference between the FMV and the strike price: 2,000 shares multiplied by ₹40, which is ₹80,000, taxed as salary income. Because his company was not an eligible 80-IAC startup, he could not defer the perquisite, so the ₹80,000 was added to his Form 16 in that year. In 2026 he sells all 2,000 shares to a private buyer at ₹150 per share, receiving ₹3,00,000. The cost basis for capital gains is the FMV already taxed, which is ₹50 per share, so his cost is 2,000 multiplied by ₹50, which is ₹1,00,000, and his capital gain is ₹3,00,000 minus ₹1,00,000, which is ₹2,00,000. He held the shares for about four years from exercise, which is more than 24 months, so the gain is long-term under section 112, taxed at 12.5% with no indexation after Finance Act 2024, giving ₹25,000 before surcharge and cess. Critically, the ₹1.25 lakh annual exemption under section 112A does NOT apply to his unlisted shares — that exemption exists only for listed equity or equity mutual funds — so the entire ₹2,00,000 gain is taxable. His colleague at the same startup, who is at an eligible 80-IAC company, deferred the perquisite to the earliest of sale, exit or 48 months from the end of the assessment year of exercise under section 192(1C). Vivek reports the ₹2,00,000 gain in the capital gains schedule and keeps the exercise statement, the FMV certificate and the sale contract. A quick call with us dials in the final figure. Vivek also verifies the FMV certificate used at exercise, because the same FMV becomes his cost basis for the later sale and any error compounds into two computations. If the company later gets listed, shares sold on the exchange after listing would follow the listed rules, but shares sold privately before listing remain unlisted-asset treatment. The buyer in a private transaction may insist on documentation of the FMV for their own records, so Vivek keeps the valuation report from the exercise date. A quick call with us dials in the final figure.

Claims influencers make about this moment

Partly trueStale numbers“Equity LTCG up to ₹1 lakh is tax-free”
Legit“Startup ESOPs have zero tax at vesting — you only pay when you sell.”

Questions people actually ask

What is the LTCG rate on unlisted shares?

Unlisted shares held over 24 months are taxed at 12.5% with no indexation after Finance Act 2024. There is no ₹1.25 lakh exemption — that applies only to listed equity under section 112A.

How are ESOP shares taxed?

Vesting creates a perquisite under section 17(2)(vi) at FMV minus the price paid, and the later sale is a capital gain using that FMV as cost. Eligible startup employees can defer up to 48 months.

Is there a ₹1.25 lakh exemption for unlisted shares?

No. The ₹1.25 lakh annual exemption is limited to long-term gains on listed equity and equity mutual funds under section 112A.

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Sections: 112, 17(2)(vi), 192(1C), 48 · Last verified 2026-08-11 · Reviewed by Harun Raaj & Associates, Chartered Accountants. Every figure cites the Income-tax Act, 1961 (with ITA 2025 mapping via our section index).