Tax on IPO listing gains in India: STCG, LTCG and ITR
Updated 26 October 2026 · 5 min read
If you sell IPO shares for more than the issue price, the profit is a capital gain. For listed equity shares sold on a stock exchange (where securities transaction tax, STT, is paid), shares held for 12 months or less give a short-term capital gain (STCG), taxed at 20% for sales on or after 23 July 2024. Shares held for more than 12 months give a long-term capital gain (LTCG), taxed at 12.5% on gains above ₹1.25 lakh in a financial year. Surcharge and cess are added on top.
Selling on listing day is therefore a short-term gain. This guide explains how the holding period is counted, how to work out the tax, how losses are treated, and which return to file. Tax rules change with Budgets, so treat this as an overview and check your own case with a chartered accountant (CA).
When the holding period starts
The holding period starts on the date the shares are allotted to you, not the date you applied or the date they were credited or listed. Under the T+3 timeline the allotment is finalised on T+1, so the allotment date is usually the day after the issue closes. Your demat statement and the registrar's allotment record show it. Counting 12 months from that date tells you when a sale becomes long-term.
Current rates for listed equity shares
| Type of gain | Holding period | Sale on or after 23 July 2024 | Sale before 23 July 2024 |
|---|---|---|---|
| Short-term (STCG) | 12 months or less | 20% | 15% |
| Long-term (LTCG) | More than 12 months | 12.5% on gains above ₹1.25 lakh a year | 10% on gains above ₹1 lakh a year |
Applies to listed equity shares where STT is paid on the sale. Surcharge and cess are extra. Rates are as announced in the July 2024 Budget; later Budgets may change them.
A worked example
Say an IPO has a price band of ₹100–105 and a lot of 142 shares, and you are allotted one lot at ₹105. Your cost is 142 × ₹105 = ₹14,910. On listing day you sell all 142 shares at ₹130, receiving ₹18,460.
- Gross gain: ₹18,460 − ₹14,910 = ₹3,550.
- Brokerage and exchange charges on the sale can be deducted as transfer expenses; STT itself cannot. Say charges come to ₹30, so the gain is ₹3,520.
- STCG tax at 20%: ₹704, plus cess (and surcharge if your income is high).
If you instead held the shares for more than 12 months from the allotment date and then sold, the gain would be long-term. If your total LTCG on listed equity for that year, including this gain, stayed within ₹1.25 lakh, there would be no LTCG tax on it.
Selling only part of your shares
Many investors sell part of their allotment on listing day and keep the rest. Each sale is taxed separately: the shares sold within 12 months give STCG, and the shares sold later give LTCG. Your cost is the issue price for every share. If you hold the same stock from other purchases too, shares held in demat are generally treated as sold on a first-in, first-out basis, which affects the holding period. Your broker's capital gains report usually works this out.
Losses: set-off and carry forward
If an IPO lists below the issue price and you sell, you have a capital loss. A short-term capital loss can be set off against both short-term and long-term capital gains in the same year. A long-term capital loss can be set off only against long-term gains. Unused losses can be carried forward for up to 8 assessment years, but only if you file your income tax return on time.
Say you made ₹3,520 STCG in one IPO and lost ₹2,000 in another sold within a year. Your net STCG is ₹1,520. Filing on time keeps the right to carry forward any unused loss.
Is it capital gain or business income?
Selling IPO shares on listing day is a delivery-based sale, not intraday trading, so it is not speculative income. Most individuals who apply for IPOs occasionally report the profit as capital gains. People who trade very frequently and in large volume may be treated as having business income instead, which is taxed at slab rates and filed differently. Where you fall depends on facts like frequency and intent; discuss it with a CA.
Which ITR form and where to report
- Capital gains are reported in the capital gains schedule of the return, not as other income.
- Individuals with salary or pension and capital gains, but no business income, usually file ITR-2.
- Those with business or professional income (including if share trading is treated as a business) file ITR-3.
- Download the capital gains statement from your broker; the annual information statement (AIS) also shows your share sales.
Grandfathering does not apply
You may read about "grandfathering" of gains up to 31 January 2018. That rule only protects shares bought before 1 February 2018. Shares allotted in a recent IPO were acquired long after that date, so it has no effect on them; your cost is simply the price you paid in the IPO.
Frequently asked questions
Is profit from selling IPO shares on listing day taxable?
Yes. It is a short-term capital gain because the shares were held for less than 12 months. For sales on or after 23 July 2024 the rate is 20%, plus surcharge and cess.
From which date is the holding period counted for IPO shares?
From the allotment date, not the application date or listing date. The allotment date appears on your demat statement and the registrar's record.
What is the LTCG exemption limit on shares?
For sales on or after 23 July 2024, long-term gains on listed equity are tax-free up to ₹1.25 lakh in a financial year; the excess is taxed at 12.5% plus surcharge and cess.
Can I set off a loss from one IPO against a gain from another?
Yes. A short-term capital loss can be set off against short-term or long-term gains. Unused losses can be carried forward for 8 years if you file your return on time.
Which ITR should I file if I sold IPO shares?
Usually ITR-2 if you have no business income, or ITR-3 if you do. Check the current forms and your own case with a CA, as eligibility for the simpler forms changes from year to year.