Definition
Listing Gains Tax (STCG)
Gains from selling IPO shares soon after listing are short-term capital gains, taxed at a higher rate than long-term gains in India.
If listed equity shares are sold within 12 months, the profit is a short-term capital gain (STCG) taxed at a flat rate under the Income-tax Act, whereas gains after 12 months are long-term (LTCG) taxed at a lower rate above an annual exemption threshold. Most IPO flipping on listing day therefore attracts STCG.
The higher tax on short-term gains is one reason long-term investors are less inclined to flip. Indian budget changes periodically revise the STCG and LTCG rates and the exemption limit, so the exact figures should always be checked.
Related terms
- Listing DayListing day is the first day an IPO's shares are admitted to trading on the stock exchange.
- Flipping (IPO)Flipping is the practice of selling IPO shares quickly after listing — often on listing day — to lock in listing gains rather than holding for the long term.
- Listing GainListing gain is the profit an investor makes when an IPO share lists on the exchange above its issue price.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.