• Home
  • Article
  • Taxability of Listing gains in an Initial Public Offering (IPO)

Nikita Motwani | Nov 15, 2021 | Views 716852

Taxability of Listing gains in an Initial Public Offering (IPO)

Taxability of Listing gains in an Initial Public Offering (IPO)

IPO’s are an opportunity for picking up great stocks for long term investment. But one of the major reasons for investing in IPO’s by retail investors is listing gain. Due to increased market awareness and increased liquidity recent IPO’s have been oversubscribed. Because of huge demand shares are listed on prices higher than allotment price which results in listing gain. Most of retail investors invest for such gain and they sell the shares on the day of listing.

Tax implications on listing gains

Gains arising from sale of equity shares is taxed as capital gain. Tax liability depends on the holding period of shares. If equity shares are held for a period less than one year, gain arising on its transfer is considered as short term gain. However is these are held for a period more than one year then gain will be taxable as long term gain.

So if shares are sold on listing date then such gain will be considered as short term gain since sold within one year. Short term gains are taxable at 15% as per the Income Tax Act.

But what if investor decides to hold shares and sell it after one year. In such case it will be long term capital gain. Long term capital gain upto Rs. One lac in a financial year is not taxable. Gains above it are taxable at 10%.

It is also possible that instead of gains, investor suffers loss. In such case investor can set off and also carry forward them as per the provisions of Income Tax Act.

StudyCafe Membership

Join StudyCafe Membership. For More details about Membership Click Join Membership Button

Join Membership

In case of Any Doubt regarding Membership you can mail us at [email protected]

Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"

Author Bio

My Recent Articles

Taxability of Listing gains in an Initial Public Offering (IPO) View All Posts

Leave a Reply