Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The 24-month rule
Unlike listed shares (12 months), unlisted shares become long-term only after 24 months. Long-term gains are taxed at 12.5% (from 23 July 2024); short-term gains (held 24 months or less) are added to income and taxed at your slab rate — not the special 20% that applies to listed shares. Confirm current rates per the Finance Act.
Where it comes up
This typically arises on startup ESOP shares, private-company shares, and pre-IPO holdings. For ESOPs, remember there were two taxing points — the perquisite at exercise and capital gains at sale — and the holding period for the sale runs from allotment. If the company lists before you sell, the listed rules then apply.
A worked example
Example: you exercised ESOPs at a ₹100 fair value and sell three years later at ₹400 — a long-term gain of ₹300 per share at 12.5%. Sell within two years and the ₹300 is short-term at your slab rate, which is usually higher. Holding past 24 months can materially cut the tax. Our team can compute and plan the timing.