Tax on IPO- listing gains on Initial Public Offering
The stock market has gotten the tremendous attention of small investors in recent years. Thanks to social media & google… more & more people are attracted to the stock market, especially IPOs. It is seen that people are investing in IPOs to get listing gains. Investment with the intention of listing gains reduces the risk of losses arising due to fluctuations in the market prices. But it is not true that you will always get profits on all IPOs. Besides this, people are also not aware that listing gains are taxable under the Income Tax Act. This article discusses the taxability of listing gains on shares allotted under IPO. Read carefully…
Tax on listing gains of IPO
Listing gains arise when an investor makes an application in an IPO and sells the shares allotted within a short span of time generally not more than 12 months. Since the shares allotted are sold within a period of 12 months, the gain arising on the sale of shares (Sales Price- IPO price) will be treated as “Short Term Capital Gains” and charged to income tax at the rate of 15% while filing income tax return online.
The following points are to be noted in this regard:
- Listing gains on shares held up to 12 months shall be treated as “Short Term Capital Gains” under the head of Capital Gains.
- The tax rate applicable on short-term capital gains on IPO is 15%.
- But in case your total income including listing gains on IPO is not more than Rs. 2,50,000 (Rs. 3 lakhs in case of senior citizens), then you need not pay any tax on such listing gains.
- However, if the allotted shares are sold after 12 months from the date of allotment, the gains arising on such shares will be treated as “Long Term Capital Gains” and taxed at a special rate of 10% of long-term capital gains in excess of Rs. 1 lakh.
For Income Tax Return Filing Services for Shares connect at 9660930417
