Unlisted Shares in India: How They Are Bought, Held and Taxed

Unlisted shares are shares of companies that are not traded on a stock exchange. You buy them through a private deal: you pay the seller or a dealer, and the shares reach your demat account through an off-market transfer. There is no exchange price and no exchange grievance route. If the company later lists, your shares are locked in for 6 months from the IPO allotment.

Key facts

What unlisted and pre-IPO shares are

Any share not listed on a recognised stock exchange is unlisted. That covers private companies, public companies that never listed, and delisted companies. “Pre-IPO shares” is a sales label for unlisted shares of a company expected to file for, or already in, an IPO. Legally they are the same thing.

Most retail buyers get these shares from employees selling ESOP shares, early investors, or dealers who hold an inventory. Our stock market basics guide covers how listed shares trade; this page covers what happens outside the exchange.

How a transfer actually happens

You need a demat account, because shares of public companies are held in demat form. See what a demat account is if you do not have one. A typical deal runs like this:

1. Agree the company, quantity and price with the seller or dealer, in writing.
2. Share your demat details (DP ID and client ID, usually from your client master report) with the seller.
3. Pay the agreed amount from your own bank account and keep the payment proof.
4. The seller gives a delivery instruction to their depository participant (DP), using the “off-market sale” reason code.
5. For a sale, CDSL requires the seller to enter consideration and payment details before the transfer can go through.
6. The depository collects stamp duty on the consideration, and the shares move to your account on the execution date.
7. Check that the shares appear in your demat holding statement or CAS.

NSDL notes that the delivery and receipt details must match, including the execution date, or the transfer is rejected. Payment is handled outside the depository, so the order of payment and transfer is a matter of trust between you and the other side.

Stamp duty

Since 1 July 2020, stamp duty on a delivery-based transfer of shares is 0.015% of the consideration, or ₹15 per ₹1 lakh. For off-market transfers made for a consideration, the depository collects it. The law puts the duty on the transferor, though dealers may pass the cost on in the price. Gifts and other transfers without consideration do not attract this duty, according to SEBI’s FAQ on the Indian Stamp Act.

Price discovery and risks, as SEBI describes them

SEBI’s press release of 17 June 2026 repeats warnings it issued in August 2016 and December 2024. Its points:

• Electronic platforms facilitating trade in unlisted securities of public companies are neither authorised nor recognised by SEBI.
• Only recognised stock exchanges may provide a platform for trading in securities.
• If a dispute arises, you do not get investor protection under SEBI or exchange jurisdiction.
• You also cannot use exchange grievance redressal or the SMART ODR online dispute resolution system.

In practice, this means:

• The price you see is a dealer quote, not a traded price.
• Exiting depends on finding a buyer.
• If the IPO is priced below what you paid, you absorb the difference.

This page gives information only and does not recommend any unlisted share.

Lock-in after listing for pre-IPO holders

Regulation 17 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 locks in the entire pre-issue share capital for 6 months from the date of IPO allotment. This applies to shares you bought in the unlisted market. The NSE red herring prospectus of September 2026 shows how it works:

• Shares sold through the offer for sale are not locked in.
• Shares held by registered venture capital funds, category I and II AIFs and FVCIs are exempt, subject to conditions.
• Locked-in shares can move only to another holder of locked-in shares, and the lock-in continues with them.

If you expect to sell on listing day, check the lock-in first. Our IPO calendar tracks upcoming issues.

Tax on unlisted shares

The 12.5% rate applies to transfers from 23 July 2024, under Section 112 of the Income-tax Act, 1961. For sales from 1 April 2026 the same rate sits in section 197 of the Income-tax Act, 2025. The ₹1.25 lakh exemption is only for listed equity on which STT is paid.

Two anti-avoidance rules also apply to unlisted shares, as Treelife’s guide explains:

• Selling below fair market value: under Section 50CA, the fair market value replaces your sale price when capital gains are worked out.
• Buying below fair market value: under Section 56(2)(x), if the gap is more than ₹50,000, the buyer is taxed on it as income from other sources.

For income from 1 April 2026, check the 2025 Act numbers for these sections with a professional.

If the company lists before you sell, you pay tax under the listed-share rules. How the holding period and cost are counted for shares bought before listing is a technical point. A chartered accountant should check large or complex cases.

Use the capital gains calculator to estimate the tax on a sale.

Documents to keep

• The written deal confirmation or share purchase agreement, with price and quantity
• Bank statement showing the payment from your account
• Your demat transaction statement or CAS showing the credit and its date
• Any invoice or note from the dealer, including stamp duty charged
• A valuation or fair market value report, if the price was far from the company’s value
• For a later sale, the same set of records for the sale leg

You must also report unlisted holdings in your return. The e-Filing portal says a holder of unlisted equity shares at any time in the year must file ITR-2, not ITR-1.

Frequently asked questions

Is buying unlisted shares legal in India?

A private transfer between demat accounts is permitted. SEBI warns that online platforms trading unlisted shares are not recognised by it, and that its investor protection does not apply.

How do I buy pre-IPO shares?

You agree a price with a seller or dealer, pay from your bank account, and receive the shares by off-market transfer into your demat account.

Can I sell pre-IPO shares on listing day?

Usually not. Pre-issue capital is locked in for 6 months from the IPO allotment, with limited exceptions.

How are unlisted shares taxed?

Gains on shares held more than 24 months are taxed at 12.5% without indexation. Gains on shares held for 24 months or less are taxed at your slab rate.

Is there stamp duty on buying unlisted shares?

Yes. The depository collects 0.015% of the consideration on an off-market sale.

Can I file ITR-1 if I own unlisted shares?

No. If you held unlisted equity shares at any time during the year, you must use ITR-2, or ITR-3 if you have business income.

Sources

• PR 32/2026: Transaction in securities of unlisted public limited companies on various platforms — SEBI (checked 16 Sep 2026)
• FAQs on the Indian Stamp Act amendments — SEBI (checked 16 Sep 2026)
• Validation of reason codes for off-market transactions — CDSL (checked 16 Sep 2026)
• Off-market transfers — NSDL (checked 16 Sep 2026)
• National Stock Exchange of India red herring prospectus (lock-in section) — SEBI (checked 16 Sep 2026)
• ITR-2 FAQs — Income Tax Department e-Filing portal (checked 16 Sep 2026)
• Stamp duty on securities transactions from 1 July 2020 — PwC India (checked 16 Sep 2026)
• Tax on sale of unlisted shares — Treelife (checked 16 Sep 2026)