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# Tax on Selling Unlisted Shares: What Sellers Actually Pay
General information, not tax advice. Rates, holding-period rules, and surcharge thresholds change with the Finance Act, and how they apply depends on your residency, income slab, and the scheme your shares came from. Confirm the numbers for your own situation with a chartered accountant (CA) before you transact.
A seller of unlisted shares can face up to two taxable events — one at exercise (ESOP holders only) and one at sale (everyone). Keeping them separate is most of the work of understanding this topic.
Event 1 — perquisite tax at exercise (ESOP holders)
When you exercise vested options, the difference between the **fair market value (FMV) of the shares — set by a merchant-banker valuation — and your exercise price is taxed as salary income**. Your employer deducts TDS on it, and it lands in your Form 16 like a bonus would.
Two things worth knowing:
- It is a cash-flow problem, not just a tax. You pay the exercise price *and* the tax before receiving a single rupee from any sale — one of the classic traps in common mistakes when selling ESOPs.
- Eligible startups can defer it. Employees of DPIIT-recognised startups meeting the Section 80-IAC conditions can defer the perquisite TDS to the earliest of: five years from the year of allotment (running from the end of the relevant assessment year), the sale of the shares, or leaving the employer. Most companies do not qualify — check with your employer and CA.
The FMV used here becomes your cost of acquisition for the next event, so the same gain is not taxed twice.
Event 2 — capital gains at sale (everyone)
When the shares are sold, the gain over your cost of acquisition is a capital gain. For unlisted shares:
- Held more than 24 months → long-term. Long-term gains on unlisted shares are currently taxed at **12.5% without indexation** for transfers on or after 23 July 2024 (earlier transfers used 20% with indexation). Surcharge and cess apply on top.
- Held 24 months or less → short-term, taxed at your slab rate.
Note the threshold: 24 months, not the 12 that applies to listed shares. For ESOP shares, the clock starts at allotment on exercise — not at grant, not at vesting.
The deep dives stay canonical elsewhere: capital gains tax on unlisted shares for computation detail and how to show unlisted shares in your ITR for reporting — including the disclosure of unlisted holdings the ITR requires every year, even without a sale.
Buybacks are a different regime
If your exit is the company buying back its own shares rather than a secondary sale, the tax treatment is materially different — buyback proceeds are dealt with under their own provisions, not the capital-gains path above. Before choosing between a live buyback and a secondary sale on after-tax numbers, read tax on ESOP buybacks and run both scenarios with your CA.
NRI sellers: TDS happens at the source
For resident sellers of unlisted shares there is generally no TDS on a secondary sale — you self-assess and pay through advance tax. For NRI sellers the buyer must deduct TDS under Section 195 on the taxable gain before paying you, and the remittance paperwork (Form 15CA/15CB) follows. An NRI seller expecting a lower liability can apply for a lower or nil deduction certificate in advance — after the deduction, the only route to the difference is a refund via the return. The mechanics are in TDS on unlisted share sales.
The seller's checklist
- 1Confirm your holding period against the 24-month line before agreeing a sale date — a few weeks can change the rate that applies.
- 2ESOP holders: dig out the exercise-time FMV; it is your cost basis, and losing the record means reconstructing it later.
- 3NRIs: raise the TDS question with the buyer *before* signing, not at settlement.
- 4Selling a large holding across two financial years can change the surcharge picture — a structuring question for your CA, covered from the strategy side in the selling hub.
If you are heading toward a sale, Polemarch's sell desk handles the transaction side; the tax side belongs to you and your CA.
Ready to sell? Start with one request
If you hold unlisted shares, pre-IPO stock, or vested ESOPs, Polemarch's sell desk gives you three routes from a single submission: a direct purchase offer from Polemarch itself (the Polemarch Guarantee — the guarantee is that Polemarch is the buyer, not a promise about price or return), an assisted sale worked through our buyer network, or a waitlist entry that alerts us the moment matching demand appears. Submit the company, quantity, and your price expectation at /dashboard/sell — you see the offer before you commit to anything, and once a transfer is verified, payment settles to your bank within T+2 working days.
*Published by the Polemarch editorial team. Educational only — not investment, legal, or tax advice.*