BT Explainer | NSE IPO: How unlisted holding will be taxed if you tender shares in OFS

NSE IPO: Listing bound-National Stock Exchange of India (NSE) has contacted its existing shareholders to participate in the offer-for-sale (OFS) of forthcoming IPO. NSE is reported to raise a total of Rs 23,000 crore via its maiden offering, which shall be entirely an offer-for-sale, offloading nearly 4.5-5 per cent stake.

Sharing the eligibility criteria to participate in OFS, NSE said that shareholders must have fully paid-up and held continuously since June 15, 2025, which is at least one year before the expected filing of the draft papers (DRHP). Also, no shares should be subject to any restraining order of any court or tribunal, any charge, lien, pledge or transfer restriction of any kind.

In its communication, NSE said that shareholders shall seek tax advice to sell equity shares in the IPO. Neither the company nor the BRLMs, nor any other advisors will be responsible for the decision, it added. However, investors, who are looking to tender shares in OFS may attract strong taxation as per current applicable norms.

Decoding the tax breakup for NSE's unlisted shares, Amit Singhania, Partner, Areete Law Offices said the any sale of in the pre-IPO market within 24 months of purchase will be considered as short-term capital gains and are taxed as per the income-tax slab rate of the seller, including surcharge and cess also.

However, if an investor is holding unlisted shares for more than 24 months, that will be taxed at 12.5 per cent, without benefit of indexation and NSE shares are no exception in this. This includes OFS as well and if investors have bought NSE shares with two years of listing date, they will be taxed as short-term capital gains only, he said.

Investors should note that pre-IPO shares carry a mandatory six-month lock-in. Those who do not tender their holdings in the offer-for-sale (OFS) will not be permitted to sell the shares for at least six months from the date of allotment. The shares can be sold only after the lock-in period ends.

“For investors selling shares after the lock-in period expires post listing, the tax treatment will be the same as for any other listed company. To qualify for long-term capital gains (LTCG) tax, investors must have purchased the shares at least six months prior to the allotment date. Any sale after the lock-in expiry with a holding period of less than 12 months will be treated as short-term capital gains and taxed accordingly,” Singhania adds.

It is important to note that submitting an expression of interest (EOI) does not guarantee the allocation or sale of shares in the IPO. The deadline for submitting EOIs is set for April 27, 2026, at 5 pm. Also, investors participating in OFS will not be allowed to apply for NSE shares in the IPO.

If an investor is exiting around the six-month mark, post listing, it clearly falls into short-term capital gains territory, attracting at a 20 per cent tax plus surcharge and cess on your gains, said Manoj Puravankara, Co-Founder & Group COO, Atom Privé Financial Services.

"This means that timing your exit becomes quite important — especially if the upside is limited. In many cases, holding on for a few more months to cross the one-year mark can make a meaningful difference to post-tax returns, particularly for long-term investors," he adds.

An investor buying NSE shares now shall not be considered eligible to participate in its forthcoming OFS tender. However, they can apply for the IPO. Selling and taxation on the sale of NSE shares is not an exception and will be treated as usual equity only.

The OFS route does not confer any real tax arbitrage to investors and is, in substance, fiscally neutral with secondary market transactions once the shares are credited, the entire analysis collapses into the settled framework of listed equity taxation, where timing alone drives outcomes, said Sonam Chandwani, Managing Partner at KS Legal & Associates.

"The policy intent is fairly clear discourage quick churn and incentivise capital stability yet in practice, given market volatility and liquidity preferences, most OFS or IPO participants continue to behave tactically rather than tax-efficiently, effectively accepting the higher short-term incidence as a cost of opportunistic exits rather than structuring their holding period for tax optimisation," she said.