Unlisted share sale Income to be taxed as capital gains

Income from sale of unlisted shares would be treated as capital gains and taxed at a lower rate than business income to have a uniform approach and avoid litigations, the Income Tax department has said. "It has been decided that the income arising from transfer of unlisted shares would be considered under the head 'capital gain' irrespective of period of holding, with a view to avoid disputes/litigation and to maintain uniform approach," CBDT said in a notification.

Central Board of Direct Taxes said that for determining the tax treatment of income arising from transfer of unlisted shares for which no formal market exists for trading, a need was felt to have a consistent view in assessments pertaining to such income. Capital gain on sale of unlisted securities attract a long term capital gain tax at the rate of 20 per cent with indexation benefit. Business income, on the other hand, is taxable on slab rate which can be as high as 30 per cent, that too without indexation. Capital Gain on sale of unlisted securities which qualify as short term is taxable at 15 per cent.