How to Sell Unlisted Shares in India: Step-by-Step Process, Tax & Lock-in Rules

Do you have unlisted shares and want to sell them? You may probably have questions in your mind, like-

How do I find a buyer? 

How long will it take

Will I actually get paid on time?

Don’t worry, you have the right questions in your mind. Selling unlisted shares doesn't work like selling on the stock market, so it's natural to wonder how the whole thing works out. Once you know the steps, finding a buyer, transferring the shares, and getting paid, the whole process together becomes quite simple. In this blog, we'll explore the complete process of how to sell unlisted shares in India, along with the tax rules and things you should keep in mind before you go ahead.

How to Sell Unlisted Shares in India: Step-by-step Process 

Here is a systematic step-by-step approach to selling unlisted shares in India for beginners and professionals alike:  

1. Evaluate the price 

Unlike the listed stock market, where the price is listed uniformly. The price of unlisted shares is usually based on recent transactions in that stock, the company's last known valuation, and how much demand there currently is. Before selling out your shares, check how much the shares are priced between dealers.  

2. Find a buyer

This is usually the hardest part of selling unlisted shares. You need someone willing to buy at your quoted price or close to it, and that's not always easy to find on your own.

This is exactly why most investors go through a broker or an unlisted shares intermediary. They already have a network of buyers and sellers ready to transact. It matters even more here because unlisted shares are known for low liquidity, one of the key risks of buying unlisted shares that's worth understanding before you invest. 

3. Complete the necessary Documentation 

Once you have finalised the price of your shares with the buyer, you need to complete the required verification process. This usually includes confirming PAN details, Demat account information, bank details, and any additional documents requested by the intermediary handling the transaction. Completing the paperwork carefully helps avoid delays during the transfer.

4. Initiate the transfer from your demat account

This is the actual step where selling takes place. Depending on your depository, you'll do this in one of two ways:

• Delivery Instruction Slip (DIS): The older, offline method you fill in details like your Client ID, the company's ISIN, quantity, and the buyer's DP ID, then submit it physically or through your broker.
• Online Transfer (CDSL Easiest / NSDL Speed-e): Many demat accounts now let you approve the transfer online instead of filling out paperwork. It's quicker, and most investors prefer this route today. 

These are the methods through which shares move from your demat account to the buyer's, and the transaction is recorded through CDSL or NSDL.

5. Receive the payment

Once the buyer confirms that the shares have been credited in his/her account, the funds are released to you via NEFT or RTGS. Most platforms settle this within 24 hours to a few working days, though it depends on how quickly both sides complete their part.

This is the complete step-by-step process to sell unlisted shares. However, there are certain things that you need to keep in mind before selling your unlisted shares. Let discuss them in detail.   

Things to keep in mind before selling Unlisted shares

Before you sell your unlisted shares, there are certain important things to keep in mind, such as: 

Selling unlisted shares before IPO

Once a company files its Draft Red Herring Prospectus (DRHP) with SEBI, its shares continue trading in the unlisted market. But once the IPO is officially announced, the company's ISIN gets frozen after a few days. From that point, no more transfers are allowed in the unlisted market. If you are planning to sell your shares before listing, remember the deadline is not the IPO date itself, but a few days or weeks before the shares get listed on the exchange. 

The Lock-in Period 

After a company gets listed on the exchange, its shares have a 6-month lock-in period for pre-IPO shareholders from the date of listing. This exists to stop early investors from selling large quantities of shares right after listing and crashing the price. Some companies do include their own transfer restrictions in ESOP or shareholder agreements, so it's worth checking those terms before you plan an exit.

Tax Implications of Selling Unlisted Shares 

It's always important to understand the tax implications of selling unlisted shares in India, since this directly affects how much you actually earn through the sale of your shares. The tax on the sale of unlisted shares depends entirely on how long you've held the shares. For unlisted shares, the cut-off is 24 months from the date of purchase or allotment:

• Shares held for less than 24 months (Short-Term Capital Gains): Your profit gets added to your total income for the year and taxed at your regular income tax slab rate.
• Shares held for 24 months or more (Long-Term Capital Gains): Taxed at a flat 12.5%, regardless of your income bracket, though without the benefit of indexation.

Summary 

Many investors plan to sell their unlisted shares without even knowing the entire process and certain important things. The result? The process gets stuck, and the money suffers. The things that actually create complications with investors are the timing (missing the ISIN freeze before an IPO), the tax planning (selling just before crossing the 24-month mark), and the lock-in period after the IPO.

If you're planning to sell unlisted shares, always understand the procedure beforehand and check all the important aspects related to selling unlisted shares.

Frequently Asked Questions

What is the process of selling unlisted shares? 

You find a buyer (directly or through a broker/platform), agree on price and quantity, complete your documentation, transfer the shares from your demat account through a DIS or online transfer, and receive payment once the buyer confirms receipt.

Which broker is best for unlisted shares? 

It depends on your requirements. Company selection, pricing transparency, settlement speed, and proper documentation are the things worth comparing before choosing one.

When can you sell unlisted shares? 

You can sell your unlisted shares anytime you find a willing buyer in the private market, provided the company has not yet listed through its IPO. After listing, a 6-month lock in applies before you can sell on the exchange.

Is there a lock-in period for unlisted shares?

Yes, the 6-month SEBI lock-in applies after the company goes public.

How much stock can I sell without paying capital gains?

There's no tax exemption for unlisted shares, the way listed shares get a ₹1.25 lakh LTCG exemption. Gains on unlisted shares are taxable as per the time period for which the share is held.

How to sell unlisted shares online? 

You can sell your unlisted shares comparatively easily through a broker platform that deals in unlisted shares, as they generally have a record of verified buyers and sellers. 

Can I sell unlisted shares before listing? 

Yes, you can sell unlisted shares before listing, but only until the company's ISIN gets frozen once the IPO is officially announced. Once that freeze happens, no further off-market transfers are allowed, so that freeze date is your real deadline if you want to exit before listing.

Author: Komal Bhatt

Komal Bhatt is a finance content writer at InvestKraft, specialising in well-researched articles on financial products, stock markets, and investment opportunities, with a particular focus on unlisted shares.

She holds a Master’s degree in Commerce from the University of Delhi, which gives her a solid academic foundation in finance and business. With over three years of hands-on experience in creating digital finance content, Komal has developed a clear understanding of investor needs through her work on wealth management, NISM certification programs, and market education materials.

Komal is passionate when it comes to breaking down complex financial concepts into simple, accurate and actionable insights. Her goal is to help everyday investors understand markets better and make more informed decisions based on reliable, research-backed information.