The rates
| You sell the shares | Taxed as | Rate |
|---|---|---|
| Within 12 months of allotment, including on listing day | Short-term capital gain | 20%, plus 4% cess |
| After 12 months | Long-term capital gain | 12.5% on gains above ₹1.25 lakh a year, plus cess |
This is for shares listed on an Indian exchange and sold there, with securities transaction tax (STT) paid. The rates are the same in both regimes.
Listing day sales aren't trading income
Shares allotted in an IPO are delivered to your demat account, so selling them on listing day is a sale of shares you owned: a short-term capital gain, not intraday trading.
Example
You're allotted 100 shares at ₹200 and sell them on listing day at ₹260. The gain is ₹6,000. Tax is 20% (₹1,200) plus 4% cess (₹48): ₹1,248.
Your cost and holding period
- Your cost is the price you paid in the IPO.
- The 12 months count from the date the shares were allotted to you.
The ₹12 lakh rebate doesn't cover it
In the new regime, the rebate that makes income up to ₹12 lakh tax-free doesn't apply to tax on these gains. Even with a modest salary, an IPO gain can mean tax to pay.
If the share lists below your price
Selling at a loss gives a short-term capital loss. It reduces short-term or long-term gains in the same year, and what's left can be carried forward for 8 years, if you file your return by the due date.
Advance tax and your return
- Your employer's TDS doesn't cover these gains. If the tax is ₹10,000 or more for the year after TDS, pay it as advance tax: tax on a capital gain can be paid in the instalments that come after the sale.
- Report the gains in ITR-2, not ITR-1.
Employees of the company going public
Shares from ESOPs you've already exercised were taxed as salary on exercise. When you sell, your cost is their value at exercise, and how long you've held them decides the rate. Our ESOP tax calculator works it out. If the IPO has an employee quota at a discount, ask us how the discount is taxed before you apply.
Common questions
How are IPO listing gains taxed?
As short-term capital gains at 20% plus 4% cess, because the shares were held for less than 12 months.
Is selling IPO shares on listing day intraday trading?
No. The shares were delivered to your demat account, so the gain is a short-term capital gain, not speculative income.
Does the ₹12 lakh rebate cover IPO gains?
No. In the new regime, the rebate doesn't apply to tax on short-term or long-term capital gains on shares.
Which ITR do I file for IPO gains?
ITR-2, or ITR-3 if you also have business income. ITR-1 can't be used for short-term capital gains.
Two ways to sort this
Do it yourself
- Download your broker's capital gains statement.
- Separate IPO shares sold within 12 months from those held longer.
- Pay advance tax on the gain in the next instalment if needed.
- Report the gains in ITR-2 by the due date.
Let an expert do it
We work out the tax on your IPO gains and ESOP shares, and file ITR-2 for you.
The first chat is freeWork it out for yourself
- Capital gains: Tax on shares, mutual funds, gold and property you sold.
- Tax-loss harvesting: Book losses to cut tax on your capital gains.
- ESOP tax: Perquisite tax at exercise and capital gains at sale.
- Advance tax: Instalments due, and interest if you pay late.
Work out the tax on your IPO shares.
Open the capital gains calculatorSources
- Tax rules for salaried individuals, AY 2026-27, Income Tax Department
- How to invest in an Initial Public Offer (investor education), Securities and Exchange Board of India
This guide explains the rules in general. For your own situation, .