InvestorQ : Can you explain how this Section 111A would work in the case of unlisted shares in Indian companies?
Ria Jain made post

Can you explain how this Section 111A would work in the case of unlisted shares in Indian companies?

Answer
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Anu Biswas answered.
1 year ago


Let us understand this with the case of Jaya Jaitley who is a salaried employee. In the month of August, 2017 she purchased 100 shares of Notan Pens Ltd. @ Rs. 100 per share. These shares were sold in August, 2018 @ Rs. 125 per share to his friend. The shares are not listed in any recognised stock exchange and so the entire deal was structured as a private deal outside the stock exchange. Can the capital gain be termed as STCG covered under section 111A?

Let us go back to the basic definition in this case. Section 111A is applicable in case of STCG arising on transfer of equity shares or units of equity oriented mutual-funds or units of business trust, which were transferred on or after 1-10-2004 through a recognised stock exchange and such transaction is liable to securities transaction tax. In the given case the shares are not listed in a recognised stock exchange and, hence, the provisions of section 111A are not applicable and such gain will be treated as normal STCG. In other words, STCG on sale of unlisted shares cannot be termed as STCG covered under section 111A. In this case, the STCG is normal and, hence, will be charged to normal tax rate depending on the total income of Jaya. It will be taxed at the peak rate of tax that is applicable to Jaya.