Hold shares of US-listed companies? Know Income Tax Rules on Profit

Listed and Unlisted Shares

A listed company is a stock exchange-listed company in which the shares are openly tradable. When you invest in the stock of a company, it means that you own a share in the company that issued the stock.

An unlisted company is a company that is not listed on the stock exchange. Unlisted stocks are not listed BSE Or NSE. These shares are traded in the over-the-counter (OTC) market.

The tax implications of these unlisted companies are also different from other listed companies. Archit Gupta, CEO, Clear (formerly ClearTax), a fintech SaaS company that provides ITR filing assistance, explains that the Income Tax Act differentiates between the tax treatment of listed and unlisted shares.

“So if you have shares of a US company that is listed there but is not in India it will not be considered listed in India. They can be treated as unlisted for taxation purposes in India.” Gupta said.

The applicability of capital gains tax will depend on whether the unlisted stocks are long term or short term.

Gupta of Clear explained that for unlisted shares, the period of short-term capital gains would be considered as 24 months and long-term capital gains would be applicable only if the said unlisted shares are sold after 24 months.

“Index gains will be allowed for long-term capital gains taxation, this will increase the cost of the asset to give an inflationary effect,” Gupta said.

long term capital gains The sale of listed equity shares is fully exempted up to 1 lakh and above every year is taxed at a flat rate of 10% without the benefit of indexation.