How to Sell Unlisted Shares in India: Complete 2026 Step-by-Step Guide

By Kanishk Devbangia, NISM Series XV Certified Research Analyst (NISM-202300182946)

When Do You Want To Sell Your Unlisted Shares?

Exiting your investments from the unlisted market is a strategic decision and is not limited to the financial aspect only. Below is when you can sell your unlisted shares and why.

Pre-IPO Selling – Before the Company Lists

A lot of investors decide to sell out before the company lists because this is a valid move if the following conditions apply: the stock has increased considerably in value in the unlisted stock market (equal to or above the estimated IPO price), you would like to prevent risks after listing, or if your requirements for liquidity have changed. The pre-IPO unlisted stock market also has investors looking to buy the shares before listing – hence, a 3-12 month selling window prior to the company's planned IPO date.

Post-IPO Selling – After Lock-In Period Expires

In case the company you are involved with has gone public, your shares are now considered listed stock. Nonetheless, SEBI imposes lock-in periods for certain pre-IPO shareholders who cannot sell their stocks until the lock-in period expires.

The Need for Liquidity — Emergency or Reallocation

Investment cycles do not always coincide with life cycles. While a liquidity crisis, a more lucrative investment prospect, or the need to reallocate capital presents itself, it is possible to liquidate unlisted stock holdings — but be prepared to wait. Generally speaking, the sale will take between 1–4 weeks for reputable companies such as NSE, Tata Capital, and HDB Financial Services. In other instances, it might take a while longer.

Curtailing Losses — Realizing an Underperforming Thesis

Every unlisted investment does not go according to plan. If the fundamentals of the company have drastically declined, an anticipated public offering has been severely delayed, or changes have taken place in the management that raise concerns, there are valid grounds to cut your losses and exit without further delay. Although the unlisted market does accommodate most reputable businesses, it is always possible to sell at bargain prices. A decisive sell at a small loss is usually preferable to a prolonged hold on the security at greater loss potential.

Lock-In Rules for Unlisted Shares in 2026

Lock-in rules are the most commonly misunderstood aspect of unlisted share exits. Understanding which rules apply to your holding is the critical first step before you attempt to sell.

6-Month Post-Listing Lock-In — Latest SEBI Rules

According to the regulations of the Securities and Exchange Board of India (SEBI)'s Issue of Capital and Disclosure Requirements (ICDR), 2018, any investor who is invested in a public limited company before the issue of IPO will be under a six-month lock-in period from the time of allotment in the IPO (i.e., from the time of listing). The regulation applies to all shareholders who are considered 'pre-IPO investors' and have held their shares for less than a year prior to the filing of the IPO.

Notably, SEBI recently made amendments to its ICDR regulations in 2021, lowering the lock-in period of pre-IPO investors to six months. It was a significant improvement in the exit period of retail and high net worth individual (HNI) pre-IPO investors. The six-month regulation is still applicable for FY 2025-26.

Pre-IPO Holder Rules — What Applies to You

Lock-in provisions classify investors into different groups. If you purchase unlisted stocks from the OTC market, then you will generally be considered a 'non-promoter pre-IPO investor,' which is subject to the six-month lock-in after listing. Nonetheless, if the DRH classifies your investment in any other way (such as if the number qualifies you as an anchor investor), then the lock-in period may change. Therefore, always check the prospectus for any new filings at SEBI.

ESOP Holder Rules — A Different Framework

There are certain rules applicable to ESOP (Employee Stock Option) shares which have been converted into vested ESOP shares and placed in an employee’s demat account. As per the Companies Act, 2013, an employee is permitted to sell his vested ESOP shares provided there are no restrictions as far as employment is concerned, according to the provisions of the ESOP scheme rules. Insofar as IPO lock-ins are concerned, the shares which have already been exercised would come under the same lock-in period as other pre-IPO shares. But then, the company of the employee may apply some extra selling restrictions in its own ESOP scheme.

Practical Lock-In Checklist:

✅ Pre-IPO holder (OTC purchased) → 6 months post-listing before exchange sale

✅ Promoter → 18-36 months post-listing (graduated lock-in)

✅ ESOP holder → 6 months post-listing + check your ESOP scheme for additional restrictions

✅ Selling before listing → No SEBI lock-in; OTC sale is permitted at any time

✅ Delisted share holder → No lock-in; OTC sale permitted subject to company AoA

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

The following eight steps cover the complete selling process from pre-sale compliance checks through to fund receipt and tax documentation.

Step 1: Confirm Your Shares Are Eligible to Sell

Before moving forward, ensure whether there is any lock-in period imposed on your shares; that may be either by SEBI or by the company, depending upon whether it is filing its first IPO or whether you fall under the category of AoA transfer restrictions or ESOPs scheme. Login to your demat account and make sure that the securities have been registered without any freeze/lock-in mark with respect to ISIN.

Action: Refer to your demat statement, company's DRHP and ESOP scheme.

Step 2: Choose Your Exit Channel

Option A — Over-The-Counter Dealer or Intermediary Platform: The most common method. Sites such as Unlisted Axis have buyer contacts and are able to connect your sell transaction with a bona fide buyer in the market, for which a fair market price is negotiated. This is considered to be the recommended pathway.

Option B – Direct Purchase by Peer: This involves identifying a buyer, who could be someone from your family, workplace, or investment circle, and conducting the sale through direct contact. No intermediary fee will be charged but everything else has to be done by yourself.

Option C – Waiting for Listing: In case there is an upcoming listing, then waiting till it becomes listed and then selling might fetch you a better price if the company’s IPO listing is oversubscribed.

Step 3: Get a Current Valuation

However, in the unlisted market, there is no active market price. It would be prudent to canvass for the prices at which your chosen dealers are buying your shares. The prices offered should be compared to any recent transactions highlighted in financial publications like Moneycontrol and other unlisted share trading portals that provide indicative prices. Not considering current market prices may lead to the acceptance of a low market price.

You also need to consider the holding period and taxation aspects. If you are two months shy of reaching the two-year long-term capital gains mark, you may avoid taxes and possibly alter your net sale value by 5% - 15%.

Step 4: Find a Verified Buyer

Using a Platform: A credible platform has screened buyers. The platform handles the matching process and ensures buyer KYC before introducing the buyer to you.

On Your Own: When dealing independently, ensure that the buyer's identity, PAN, demat account information, and bank account details have been verified. Never deal with an anonymous buyer, as the off-market transaction is non-reversible.

Unlisted Axis Seller Support: Contact us here with us to gain access to our verified buyer network for your particular unlisted asset.

Step 5: Verify Buyer Credentials and Agree on Payment Terms

Prior to executing the demat transfer process, ensure that you have verified the following: the PAN of the buyer (KYC purposes, also for your record), the demat account details (ID, DP ID, and client ID) of the buyer, and the payment method and payment schedule agreed upon. The buyer should only make payments through NEFT, RTGS, or IMPS directly from their own account, and they should specify a payment reference for each payment made. This is because payment via any other medium creates tax problems.

Step 6: Complete the Demat Off-Market Transfer (DIS Slip Process)

The actual transaction is started by you as the seller. Below are the steps involved in the DIS process:

DIS physical: Collect the DIS booklet provided by your DP (much like collecting your cheque book). Enter the ID of the buying DP, Client ID, ISIN of the shares, number of units, transaction date, and reason code ('0' in this case since this is an off-market transfer). Sign and submit to your DP branch or drop-box facility.

DIS online (using CDSL EASIEST / NSDL Speed-e): Some DP firms also provide online off-market transfer capabilities through their web interface using either CDSL's EASIEST service or NSDL's Speed-e service.

Timeline for settlement: Off-market dematerialized transfers usually get settled within 2 to 5 days of the submission date. Make sure that your funds have been credited to the buyer's account before making any payment or release.

Step 7: Receive Payment via NEFT/RTGS — Never Cash

Ensure that the collection of the money and the transfer of shares take place at the same time, or that there is clear security provided for one action before the other occurs. As soon as it has been established that the shares have been credited to the buyer’s demat account, release the money immediately.

Always collect money from the seller through bank transfers, such as NEFT, RTGS, or IMPS. Maintain the bank transaction ID number in your transaction documents. This is an essential step for complying with income tax requirements as well as resolving disputes.

Step 8: Issue a Contract Note and Preserve for Tax Records

A contract note — a written document specifying the company name, ISIN, quantity sold, sale price, transaction date, buyer and seller details, and total consideration — is essential. If you transacted through a platform, they should issue this. If direct, prepare it yourself and have both parties sign.

Preserve the following for ITR filing: original purchase agreement (your cost of acquisition), the sale contract note (consideration received), demat transfer confirmation, and bank transaction reference for funds received. You will need all of these when computing capital gains in your income tax return.

Documents Required to Sell Unlisted Shares

Having the right documents ready before initiating a sale will prevent delays and protect you legally. Here is a complete checklist.

Document	Purpose	Source	Mandatory?
Delivery Instruction Slip (DIS)	Initiates demat off-market transfer	Your DP / demat account portal	Yes
PAN Card	KYC and tax identification	Income Tax Department	Yes
Aadhaar Card	Identity verification	UIDAI	Yes
Bank Account Proof	Fund receipt verification (cancelled cheque)	Your bank	Yes
Demat Holding Statement	Confirms share ownership to buyer	CDSL / NSDL via DP	Yes
Contract Note / Transaction Agreement	Legal proof of transaction terms	Issued by dealer / platform	Strongly advised
Seller Declaration (if required)	Confirms no encumbrance on shares	Required by some platforms	Platform-specific
Cost of Acquisition Evidence	Required for tax computation	Original purchase agreement / contract note	For ITR filing

A note on cost of acquisition evidence: many first-time buyers do not preserve their original purchase contract notes. Without this, computing your capital gains correctly becomes difficult, and tax authorities may dispute your claimed acquisition cost. If you have lost your original documentation, request a historical transaction statement from your DP — it will show the date of credit and can serve as supporting evidence alongside bank records of your original payment.

Cost of Selling Unlisted Shares

Understanding the total cost of exit — not just the headline price you negotiate — is essential for accurately computing your net realisation. Here is a full breakdown of what selling unlisted shares actually costs.

Cost Head	Typical Range	Notes
Dealer / Platform Commission	1–3% of transaction value	Negotiable for large transactions (>₹10L)
Stamp Duty on Transfer	0.015% of consideration	Levied under Stamp Act; paid by seller
Demat Off-Market Transfer Fee	₹25–₹100 per instruction	Charged by your Depository Participant (DP)
Short-Term Capital Gains Tax	As per slab (≤24 months)	Can be 10–30%+ depending on income bracket
Long-Term Capital Gains Tax	20% with indexation (>24 months)	Effective rate lower due to indexation benefit
Securities Transaction Tax (STT)	NIL	STT is not applicable on unlisted share sales

The total cost of selling, excluding capital gains tax, typically falls between 1.5% and 4% of the transaction value when using an intermediary. This compares unfavourably to listed equity selling costs (typically 0.1–0.5% all-in), but is the price of operating in an illiquid, off-exchange market. Negotiating dealer commission on large transactions (above ₹10 lakh) is common and advisable.

Tax on Selling Unlisted Shares in 2026

Taxation is the single most impactful cost variable in unlisted share exits — and the most commonly misunderstood. The rules below are based on the Income Tax Act, 1961 (as amended by the Finance Act 2024 and operative in FY 2025-26).

Long-Term Capital Gains (LTCG) — Held More Than 24 Months

If you have been holding unlisted stocks for more than two years prior to the date of sale, the gain will be considered Long-Term Capital Gain (LTCG). The tax rate applicable is 20% with the advantage of indexation. Indexation will help you to increase the purchase price based on the Cost Inflation Index (CII) published annually by the CBDT. Example: If you have bought stocks in the year 2022-23 worth ₹1,00,000 and the indexed cost in 2025-26 is ₹1,18,000, then you need to pay taxes on the gain above ₹1,18,000, but not on the total gain.

Short-Term Capital Gains (STCG) — Held 24 Months or Less

However, if you dispose of it within two years, the full profit becomes Short-Term Capital Gain and gets added to your total income. It will be taxed under the same rate as that of income tax slab, which can be as high as 30%, excluding any surcharge or cess for individuals under the highest income slab. This makes the 24-month LTCG limit crucial from a financial perspective. Evaluate the feasibility of extending the holding period by a couple of months beyond this mark.

Surcharge Applicability

The rate of surcharge will be applicable in income tax in case the total income of the taxpayer is more than ₹50 lakhs. However, in the case of Long Term Capital Gains from unlisted shares, the rate of surcharge can be up to a maximum of 15%, irrespective of the taxable income (as per the provisions of the Finance Act). The rate of surcharge applicable to Short Term Capital Gains on unlisted shares (ordinary income) shall be as under.

ESOP-Specific Tax Treatment

Two types of taxation apply to ESOPs, thus making them extremely complicated. During exercise of the option (i.e., when you get shares), the amount equal to the difference between the Fair Market Value of the share on the date of its exercise and the exercise price is considered a perk and is taxed according to the slab rates as income from salary. The second stage of taxation comes once you sell the exercised shares, whereby any gains beyond the fair market value of the share on the date of exercise are taxed under the capital gains category. If these gains pertain to ESOPs issued by DPIIT recognized startups, there is a particular exemption available under Section 80-IAC.

Tax Scenario	Rate	Indexation?	ITR Schedule
LTCG — Unlisted Shares (>24 months)	20% + surcharge + 4% cess	Yes — reduces taxable gain	CG → B3
STCG — Unlisted Shares (≤24 months)	As per income slab + surcharge + 4% cess	No	CG → B3
ESOP Perquisite (at exercise)	Salary slab rate	Not applicable	Schedule S
ESOP Capital Gain (post-exercise)	LTCG/STCG as above based on holding	Yes, if LTCG	CG → B3

How Unlisted Axis Helps Sellers

An illiquid and unregulated market coupled with an incorrect choice of partner is the most frequent cause of avoidable losses that occur when selling unlisted shares. Here’s how Unlisted Axis assists sellers throughout the entire exit process.

Network of Vetting Buyers: Unlisted Axis offers an ongoing network of vetting buyers who have been KYC approved for various unlisted securities – from large cap pre-IPOs such as NSE and Tata Capital, to unlisted securities from various sectors.

• Fair Price Discovery: Your company will be constantly tracking OTC dealer bids, transaction history, and similar valuations to give sellers an outside assessment of the fair value for your holdings, so you’re not just going by what the buyer is offering.

• Documentation Support: From the contract note to the DIS filing procedure and even the tax reconciliation statement after the transaction, Unlisted Axis helps sellers complete all necessary paperwork, minimizing the likelihood of any compliance errors that could cause problems down the road.

• Tax Guidance: Our NISM-certified analysts can walk you through the holding period calculation, indexation benefit, and ITR schedule that applies to your specific transaction — helping you optimise your net realisation and file accurately.

Connect with our team to discuss your unlisted holding: Talk to an Unlisted Axis advisor → ( https://unlistedaxis.com/ )

Frequently Asked Questions

1. Can I sell unlisted shares anytime?

Yes, with qualifications. If your shares are not subject to any lock-in — either SEBI-mandated post-IPO or company-imposed under AoA transfer restrictions or ESOP scheme rules — you can sell at any time through the OTC dealer market. The practical constraint is finding a willing buyer, not a regulatory restriction. If your company has an active IPO allotment or is in a lock-in period, selling is restricted during that window.

2. Is there a lock-in period for unlisted shares?

There is no general lock-in on selling unlisted shares through the OTC market before a company's IPO. The lock-in rules kick in after a company lists: SEBI's ICDR Regulations mandate a six-month post-listing lock-in for pre-IPO investors (non-promoters) and a longer lock-in for promoters. ESOP holders may face additional company-level restrictions under their ESOP scheme. Check your specific situation before selling.

3. What is the tax on selling unlisted shares in India?

If held for more than 24 months: Long-Term Capital Gains (LTCG) taxed at 20% with indexation, plus applicable surcharge (capped at 15% for LTCG) and 4% Health & Education Cess. If held for 24 months or less: Short-Term Capital Gains (STCG) added to your total income and taxed at your applicable slab rate (up to 30%) plus surcharge and cess. These rules apply under Section 112 of the Income Tax Act, 1961.

4. How long does it take to sell unlisted shares?

The timeline varies significantly based on the company and market conditions. For high-demand names (NSE, Tata Capital, HDB Financial), finding a buyer through a dealer network typically takes 3–10 business days; the demat transfer and fund settlement add another 2–5 business days. For less-liquid names, the process can take 3–6 weeks. Always plan for a minimum of two weeks from decision to fund receipt.

5. Can I sell ESOP shares before listing?

Yes, if your ESOP shares have been exercised and credited to your demat account, and your company's ESOP scheme and Articles of Association permit free transfer (no right of first refusal or lock-in imposed by the company). Many companies allow ESOP share sales in the secondary OTC market — but you must verify your ESOP scheme documents first. Additionally, if the company has filed its DRHP with SEBI and the IPO process is active, there may be restrictions on insider selling during the IPO blackout window.

Disclaimer:

This is written for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell securities. All data is sourced from publicly available information. Investments in securities markets are subject to market risks — please read all offer documents carefully before investing.

How to Sell Unlisted Shares in India: Complete 2026 Guide | Unlisted Axis