Which ITR form should I file if I made profits from IPO listing gains?

If you are an individual with capital gains from stock market and IPO investments, you must file ITR-2. If you are classified as an intraday trader or full-time share trader earning business income, you must file ITR-3.

How is the purchase price determined for IPO shares sold on listing day?

The acquisition cost of the shares is the exact issue price at which the shares were allotted by the company during the public issue. The sale price is the net price realized on the exchange on listing day.

What happens if I hold IPO shares for more than 1 year before selling?

If you hold allotted shares for more than 12 months, the profits qualify as Long-Term Capital Gains (LTCG) under Section 112A. Annual gains up to ₹1.25 Lakhs are completely tax-free; gains exceeding ₹1.25 Lakhs are taxed at 12.5%.

Can I set off losses from an unsuccessful IPO against profits from other IPOs?

Yes. If an IPO lists at a discount and you sell at a loss, that short-term capital loss can be offset against any other short-term or long-term capital gains realized in the same assessment year.

Taxation & Compliance 2026

Capital Gains Tax on IPO Shares: STCG, LTCG & ITR Filing Guide

When an IPO lists and an investor decides to book profits on listing day, the realized amount constitutes short-term capital gains subject to tax laws under the Income Tax Act, 1961. Here is how retail allottees must calculate, declare, and settle tax dues.

The Revised Capital Gains Tax Framework

SHORT-TERM (< 12 MONTHS)

Section 111A — Flat 20%

Applies to all shares sold on listing day or held for less than 1 year where STT is paid. Plus 4% Health & Education Cess (Effective: 20.8%).

LONG-TERM (≥ 12 MONTHS)

Section 112A — 12.5%

Applies if allotted shares are retained for over 12 months. The first ₹1.25 Lakhs profit per financial year is entirely tax-exempt.

Which ITR Form to File (ITR-2 vs ITR-3)

Salaried individuals or retired citizens who only invest occasionally in IPOs must choose ITR-2, as ITR-1 (Sahaj) explicitly disallows reporting of capital gains. All capital gains details are entered under Schedule CG.

Before listing morning, investors frequently consult informal grey market trades to estimate pre-tax expected returns against their calculated tax liability.