Meaning of Unlisted Equity Shares
Unlisted equity shares mean the shares which are not listed on any recognized stock exchange in India.
Period of holding
As per section 2(42A) of the Act, if the unlisted shares held by an assessee upto the period of 24 months immediately preceding the date of its transfer, then the asset shall be termed as “Short-Term Capital Asset” and if it is held for more than 24 months then it shall be “Long-term capital asset”.
Full value of consideration for transfer of unlisted shares
As per section 50CA, where the consideration received or accruing as a result of the transfer of unlisted shares is less than the FMV as determined, then the FMV shall be deemed to be the full value of the consideration for the purpose of calculating capital Gains.
Manner of Determination of FMV
As per Rule 11UA(1)(c)(b) Fair market value on the valuation date of such unquoted/unlisted equity shares as determined in the following manner, namely:
| the fair market value of unquoted equity shares =(A+B+C+D-L)× (PV)/(PE), where, | |
| A= book value of all the assets (other than jewellery, artistic work, shares, securities and immovable property) in the balance-sheet as reduced by- (i) any amount of income-tax paid, if any, less the amount of income-tax refund claimed, if any; and (ii) any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; | |
| B = the price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer; | |
| C = fair market value of shares and securities as determined in the manner provided in this rule; | |
| D = the value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property; | |
| L= book value of liabilities shown in the balance sheet, but not including the following amounts, namely:— (i) the paid-up capital in respect of equity shares; (ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date of transfer at a general body meeting of the company; (iii) reserves and surplus, by whatever name called, even if the resulting figure is negative, other than those set apart towards depreciation; (iv) any amount representing provision for taxation, other than amount of income-tax paid, if any, less the amount of income-tax claimed as refund, if any, to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto; (v) any amount representing provisions made for meeting liabilities, other than ascertained liabilities; (vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares; | |
| PV= the paid up value of such equity shares; | |
| PE = total amount of paid up equity share capital as shown in the balance-sheet; |
Cost of Acquisition
Cost of acquisition means the price at which the asset is originally acquired by the assesse. If the capital asset is long term in nature, then the indexed cost of acquisition shall be considered at the time of computing capital gain on transfer of capital asset.
Rate of Tax
As per section 112, long term capital gain on transfer of unlisted shares in case of resident assesse shall be taxable @ 20%.
And short term capital gain shall be taxable as per the applicable slab rates.
Availability of Chapter VIA Deductions
| Type of Capital Gains | Availability of Chapter VIA Deductions |
| STCG u/s 111A | Not Available |
| STCG other than those taxable u/s 111A | Available |
| LTCG u/s 112A | Not Available |
| LTCG u/s 112 | Not Available |
Set off and carry forward of losses under the head “Capital Gains”
Long term capital loss can be set off only against long term capital gain and remaining loss can be carried forward upto 8 years.
Short term capital loss can be set off against income under the head “Capital Gain” (i.e. can be set off against LTCG as well as STCG) and remaining loss can be carried forward upto 8 years.
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