How IPO gains are taxed
| When you sell | Type | Tax (2026-27) |
|---|---|---|
| Within 12 months of allotment (including on listing day) | Short-term capital gain | 20% plus surcharge and cess |
| After 12 months | Long-term capital gain | 12.5% on gains above ₹1.25 lakh a year |
- Gain = sale price − issue price (plus costs). Securities transaction tax applies on the sale.
- Under the Income-tax Act, 2025 these are sections 196 and 198 (formerly 111A and 112A) — see the section mapping.
- Short-term losses can be set off against short- or long-term gains; long-term losses only against long-term gains.
For NRIs
- NRIs can apply in IPOs through an NRE (repatriable) or NRO (non-repatriable) bank account and an NRI demat account.
- Tax is deducted at source on their gains at the same headline rates — and the unused basic exemption can’t be set off against these gains.
- Treaty relief may apply in some cases; file a return to claim refunds — see NRI taxation.
Employees with pre-IPO ESOPs
Shares from ESOPs were taxed as salary at exercise; on sale after listing, the gain over the exercise-date value is taxed as above. See the ESOP tax calculator.
Frequently asked questions
How are IPO listing gains taxed in India?
If you sell within 12 months of allotment, the gain is short-term and taxed at 20% plus surcharge and cess; after 12 months, long-term gains above ₹1.25 lakh a year are taxed at 12.5%.
Can NRIs apply for IPOs in India?
Yes, through an NRE (repatriable) or NRO (non-repatriable) bank account and an NRI demat account; tax is deducted at source on their gains.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.