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How listing gains in IPO are taxed?
There is no separate rule for listing gains from an IPO. “If the shares allotted in the IPO are sold within 12 months of holding then the realized gain/loss will be considered as short-term capital gain/loss and it will be taxed at 15\%.
You can sell the IPO shares on the listing day itself. However, the timings for IPO trading on the listing day are a bit different. You can place the sell order from 9.00 am to 9.45 am. There is a freeze period from 9.45 am to 9.59 am in which you cannot place, modify or cancel any order placed for the listed IPO.
What are listing gains?
Listing gains in IPOs are the profits that you get after the shares are listed on the stock market. On the day of the IPOs, mostly because of the demand of the stock, share prices on the exchange get higher. The difference between the two share prices is called Listing Gains in IPO.
Can you short sell IPO?
While there are regulatory and practical obstacles to short selling stock from an IPO, mainly via the limitations set on underwriters, short selling a company on the day of its IPO is still possible if institutional or retail investors who have purchased the stock lend it out for short selling.
How do I sell stock after IPO?
- 5 Ways to Sell Stock After an IPO. by Landon Loveall | Jul 26, 2016 | Employee Stock Options, Financial Planning, Tech Industry.
- Sell ASAP. The lock out expires.
- Sell a Little at a Time. Sell in installments.
- Hold a Percentage.
- Sell Specific Lots to Cut Taxes.
- Consider a 10b5-1 Plan.
Answer to question: If you are allotted shares on IPO and you sell the shares on first day listing , the gain (difference between sale price and issue price) will be liable to be charged under the head ‘short term capital gain’. The rate of tax on such gain is a special rate of 15\%+ surcharge.
Therefore, 90 days after your company becomes subject to the ongoing SEC reporting requirements, which is usually the public offering date, you can sell your shares (unless you are further restricted by the lockup agreement). Almost all companies try to fit their pre-IPO option and stock grants into Rule 701.
You pay tax on either all your profit, or half (50\%) your profit, depending on how long you held the shares. Less than 12 months and you pay tax on the entire profit. More than 12 months and you pay tax on 50\% of the profit only. The amount of tax you pay is dependent on the marginal tax rate of the shareholder.
Do I have to pay capital gains tax on an IPO?
If you’re income will be less than 2.5 lac (including the short term capital gains on IPO alloted shares), you don’t have to pay any tax. 15\% tax on STCG. You may get exemption if your total income for the FY don’t go beyond 2.5 lacs.