SBI Funds Management IPO listing gains: How much tax will you pay if you sell your shares?

Shares of SBI Funds Management made a debut on the stock market on Tuesday, July 21, delivering listing gains to investors who received allotments.

If you are one of those who received the allotment and are planning to book profits, then it is important to understand the taxation.

In this article, we will explain how those gains will be taxed. The tax treatment depends on how long you hold the shares.

Sell within 12 months? It will be taxed as STCG

If you sell your SBI IPO shares within 12 months of allotment, the profit is treated as Short-Term Capital Gain (STCG) and taxed at 20%, along with applicable surcharge and cess.

"If you sell your SBI IPO shares within 12 months of allotment, the profit you earn (listing gain) is treated as Short-Term Capital Gain (STCG) and taxed at 20% (plus applicable cess and surcharge)," said CA Abhishek Soni, CEO & Co-founder, Tax2win.

Here is how STCG is calculated

The SBI Funds Management IPO was allotted at ₹574 per share, the upper end of its ₹545-574 price band. Since ₹574 is the issue price paid by successful applicants, it is considered the cost of acquisition for calculating capital gains.

Suppose you were allotted 100 shares. Your total investment would be ₹57,400 (100 × ₹574). If you sold all the shares at the BSE listing price of ₹610, your sale value would be ₹61,000 (100 × ₹610). This would result in a listing gain of ₹3,600 (₹61,000-₹57,400). Since the shares were sold within 12 months of allotment, the gain would be taxed as STCG. The tax would work out to ₹720 (20% of ₹3,600), excluding applicable surcharge and cess.

Hold for over a year? LTCG rules apply

If you hold the shares for more than 12 months before selling, the gains will be treated as Long-Term Capital Gains (LTCG).

How is LTCG calculated?

The formula remains the same:

LTCG = Sale Price – Purchase Price

The only difference is that you must hold the shares for more than 12 months before selling.

Since the future sale price is unknown today, so we cannot calculate the actual LTCG yet.

Will TDS be deducted?

According to Soni, no TDS is deducted when you sell SBI IPO shares on the stock exchange.

How did the SBI IPO perform?