ITR filing 2025: Rules for reporting capital loss from delisted shares explained

ITR filing 2025: Delisted shares are those of a company that have been permanently removed from the stock exchange, meaning they are no longer available for public trading on the NSE or BSE. Delisting can occur voluntarily, when a company chooses to go private, or involuntarily, due to reasons such as non-compliance with listing requirements, bankruptcy, or liquidation. Once delisted, these shares cannot be freely traded in the market, making it important for investors to understand how to handle potential losses for tax purposes.

Can you claim capital loss on delisted shares?

Under the Income-tax Act, 1961, capital gains or losses arise only when a “transfer” of a capital asset occurs. The law defines “transfer” to include not only sale but also extinguishment of rights. Merely delisting does not qualify as a transfer— shares still exist in your demat account, and until they are either extinguished or sold, you cannot claim any loss.

If delisted shares have already been extinguished (i.e., no longer appear in your demat statement), you can claim the loss. If they are still visible, you may sell them off-market at a nominal value to a friend or relative, thereby realizing the loss.

Tax expert Rajarshi Dasgupta, Executive Director–Tax, AQUILAW, explains: “One can claim a capital loss on delisted shares only when the loss is realised, i.e., when you sell or transfer those shares.”

This means:

Voluntary delisting: Shares may still be sold in the OTC market or transferred off-market.

Involuntary delisting (bankruptcy/liquidation): Loss can be claimed when the company is struck off and no proceeds are received, provided proof of extinguishment is available.

Documents to support your claim

To substantiate capital loss from delisted shares, you may need:

If sold off-market:

Off-market transfer deed or contract note.

Bank statement reflecting sale proceeds.

Demat statement showing debit of shares.

If struck off or liquidated:

ROC strike-off notice or public liquidation notice.

Demat statement proving zero value.

Auditor/CA certificate declaring extinguishment of rights.

Personal declaration of no recovery possibility.

Tax treatment of capital loss

Short-Term Capital Loss (STCL): If shares were held for up to 24 months, the loss is short-term. It can be set off against both short-term and long-term capital gains in the same year. Unadjusted losses may be carried forward for eight years.

Long-Term Capital Loss (LTCL): If held for more than 24 months, the loss is long-term. LTCL can only be adjusted against long-term capital gains. Any balance can be carried forward for eight years, provided the ITR is filed within the due date.

Key considerations for ITR filing 2025

Report such losses under Schedule CG in your ITR.

Ensure supporting documents are maintained for verification.

Losses must be realized through sale or extinguishment; delisting alone is insufficient.

Carry-forward benefit is available only if you file before the ITR deadline.

By keeping accurate records and following compliance requirements, taxpayers can ensure that capital losses on delisted shares are effectively utilized to reduce future tax liability.