Overview of Hidden Gems of Unlisted Shares Market:-
To Understand Unlisted Shares better, let’s understand few other terminologies:-
IPO:- An initial public offer (IPO) refers to the procedure through which a private corporation’s shares are offered to the public in initial shares allocation.
Long term Capital Gain on shares:- A long-term capital gain or loss is the profit or loss derived from the sale of a qualified investment held at the time of sale for more than 12 months. Long-term capital gains are generally better treated with tax than short-term gains.
Unlisted Shares are Hidden Gems of Stock Market:-
Unlisted Equity Shares Investments are high-risk investments and thus can generate far more significant returns since early investors profit most before the firm becomes listed on stock exchanges. Many new-age (e-commerce, technology, fintech, etc.) firms are private, and investing in them will help investors diversify their stock portfolios.
Given the over-subscription in IPOs these days, it isn’t easy to secure an allocation. Investors have access to high-growth firms and tech startups that are not typically listed. In addition, unlisted share price volatility is smaller than stocks listed.
Individual investors can now engage in unlisted stock opportunities, which were previously exclusively available to only major organisations and funds. Unlisted shares can be purchased via intermediaries and platforms specialising in unlisted shares that can ease transactions.
Babli Investment eliminates the risks involved in purchasing unlisted shares of various pre-IPO companies by maintaining transparency and helping investors where they lack knowledge.
Benefits of investing in Unlisted Shares:-
Tremendous Growth Rate –
Unlisted shares are illiquid, yet this negative may be a positive for unlisted stock investors.
The inventory price is either underestimated or inflated for a lengthy period due to the illiquidity. When it’s undervalued, you have to attempt to invest.
Then you can make significant gains in the long run, especially if the stock is then listed and the firm anticipates high revenues.
Unlisted equity shares are not intended for short-term investment and are not intended for trading. So, there’s no hurry to buy and sell them to earn a cent.
You may conduct your study, look for the ideal unlisted stock, and invest and sit tight. There is no need to stress as and when the market opens or shuts every day.
If the stock price is at the appropriate level, you may merely wait for it; you can sell it and pay a fixed amount to your bank account.
Diversified Investment Portfolio:-
The more diversified a portfolio is, the less risk it faces.
Unlisted equities are either non-volatile or only modestly volatile. So one can minimise their portfolio risks by incorporating some unlisted solid stocks in the portfolio if highly volatile holdings are already present.
This does reduce not only the risk but also increases the probability of high-profit margins.
Negotiation and Close Market Investment due to OTC (Over the Counter) tradings are a few of the other significant advantages of spinning money in less time by investing in unlisted shares.
The outcome is a capital gain if you sell a capital property for more than you paid for it. Investment assets include inventories, bonds, precious metals, jewels, and immovables. The tax you pay on the income depends on how much time you owned the asset before it was sold. Capital gains are categorised as long or short-term and taxed appropriately.
Long term funds gains on shares:-
Based on grading criteria, long-term investment gains shall be taxed on taxable income at 0%, 15% or 20%. The tax rate is 15 % or lowers for most taxpayers reporting long-standing capital gains.
XYZ buys 250 shares of a listed company in April 2020 at the cost of Rs.150 per share, paying a total of Rs.37,500. He sold them for Rs.200 per share in June 2021, after 14 months at Rs. 50,000. To determine long term capital, the Indexed purchase price of the asset has to be browsed, which can be estimated from the Government of India’s Cost Inflation Index.
According to the most advanced Cost Inflation Index:-
Indexed purchase price of the shares = 37500 x 317 / 301 = 39493 approximately
Thus, XYZ’s long-term capital gains are based on the following numbers:
- Full sales value – Rs. 50,000
- Brokerage at 0.5% – Rs. 250
- Indexed purchase price – Rs. 39,493
- Indexed improvement cost – Rs. 0
The long-term capital gains made by Sandeep will be: Rs. 50,000 – (Rs. 39,493+ Rs. 250) = Rs. 10,257
Long term capital gains on unlisted shares budget:-
However, unlisted equity shares are taxed differently. In this instance, the inventory will be deemed short-term when sold within 24 months. The profits are added to the person’s income and taxed marginally.
Long term capital gain on unlisted shares budget are profiting from equities sold after 24 months. After indexation, such profits are taxed at 20%.
But there is a notion called fair market value when it comes to unlisted shares (FMV). It nominates a trading banker to set the stock FMV. If the taxpayer sells equities under the FMV, the FMV is considered the selling price by the income tax agencies.
Babli Investment makes it easy for you to conduct thorough fundamental research and curates investing in unlisted equity shares in a transparent and orderly manner, leading to various investors putting in their trust in the long run.