The year 2021 so far has been the best year for the initial public offerings (IPOs) and listings. Almost sixty-eight companies have already made their IPOs in 2021 with a cumulative fundings of Rs. 1.18 lakhs crores. These include some of the biggest business giants like Zomato, Byjus, Paytm, etc. While more than half of these IPOs did well only on the very first listing day, others (like Paytm) have gone into negative or remained flat.
As an investor, it is important to know the tax applicability on these newly listed IPO listed shares will have similar taxability as other stock market investments.
Taxability Of IPOs
According to the Income Tax Act, the taxability of the shares depends upon its period of holding.
If shares are sold within the holding period of 12 months, the realized gain or loss will be taxable as short-term capital gains or loss. Short-term capital gain is taxable at 15% plus education and higher education cess. On the contrary, if the investor sells shares after 12 months of holding, the realized gain or loss will become taxable as long-term capital gain or loss. Long-term capital gain is taxable at 10% exceeding Rs.1 lakh.
Which ITR Is Needed to Be Filled:
A taxpayer will be required to report the capital gain and loss in form ITR-2 or -3 if there is capital gains income. Also, Short-term capital loss can be set off against short term as well as long-term capital gains. In contrast, the long-term capital loss can be set off only against long-term capital gains.
Taxability Of Losses on IPOs
Any unabsorbed amount of short term or long-term capital loss can be carried forward for eight assessment years. A person must file the return within the original due date to claim the set-off and carry-forward provisions.
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IF Pre IPO shears sold after listing in shear market
lock in period for long term capital gain of 10%