Step by step for physical shares
- Check the articles and any shareholders' agreement: a private company restricts transfers, often through a right of first refusal for existing shareholders or board approval. Follow that process first; see shareholders' agreement.
- Agree the price: get a valuation, because income tax compares the price with fair market value; see valuation under Rule 11UA.
- Execute SH-4: the share transfer form is signed by the transferor and transferee, with a witness.
- Pay stamp duty: 0.015% of the consideration on a sale, under the Indian Stamp Act as amended from 1 July 2020. The rate is the same in every state.
- Lodge with the company: deliver the stamped SH-4 with the share certificate within 60 days of execution.
- Board approval and registration: the board approves the transfer, the register of members is updated and the endorsed certificate is returned.
There is no ROC form for an ordinary share transfer; the change shows in the next annual return (MGT-7 or MGT-7A). See annual ROC filing.
Demat shares
A 2023 amendment to the share allotment rules requires private companies that are not small companies (and not producer companies) to have their securities in demat form. The deadline was extended to 30 June 2025. For these companies, shareholders must dematerialise their holdings before transferring them, and the transfer happens between demat accounts, with stamp duty collected through the depository. See demat of shares.
Tax and FEMA points
- Seller: pays capital gains tax on the gain. If the price is below fair market value, the fair market value can be treated as the sale price. See our capital gains guide.
- Buyer: shares bought below fair market value can be taxed in the buyer's hands on the difference, subject to exceptions such as transfers from relatives.
- Non-resident party: a transfer between a resident and a non-resident must follow FEMA pricing guidelines and is reported in Form FC-TRS within 60 days of receiving or paying the money. See FDI filing.
Common mistakes
- Skipping the right of first refusal in the articles, which lets other shareholders challenge the transfer.
- Executing SH-4 without stamping it, or lodging it after 60 days.
- Selling at a nominal price without a valuation, which creates tax exposure for both sides.
- Transferring physical shares of a company that is required to be in demat.
Talk to Regikart
We prepare the valuation, SH-4, board resolutions and updated registers, handle demat and FC-TRS where needed, and draft share purchase agreements. See share transfer or call or WhatsApp +91 70444 94804.
Frequently asked questions
What is the stamp duty on transfer of shares of a private company?
0.015% of the consideration for a sale, under the Indian Stamp Act as amended from 1 July 2020, uniform across states.
What is the time limit to lodge Form SH-4?
The stamped SH-4 must reach the company with the share certificate within 60 days of execution.
Is ROC filing required for a share transfer?
Not for an ordinary transfer. The change in shareholding appears in the company's next annual return.
Can a private company refuse a share transfer?
It can enforce the restrictions in its articles, such as a right of first refusal or board approval, so follow them before transferring.
Do private company shares have to be in demat form?
Private companies other than small companies and producer companies must have their securities in demat form; the MCA deadline was extended to 30 June 2025.
About the author
Regikart CS Team
Company Secretaries at Regikart. Want to discuss this in the context of your business?
