The fair-value floor cuts both ways
Unlisted shares have no market price, so the law substitutes a fair-value floor to stop under-pricing. On the seller's side, Section 50CA says that if you transfer unlisted shares for less than their fair market value, worked out under the prescribed valuation rules, the FMV is deemed to be your sale consideration for computing the gain, even if you actually received less.
On the buyer's side, there is a mirror charge. Under Section 56(2)(x), if the buyer acquires the shares for more than ₹50,000 below their fair market value, that shortfall is taxed in the buyer's hands as income from other sources. So an undervalued sale of unlisted shares can be taxed twice over, the seller on the full FMV and the buyer on the discount, which is why the price and a defensible valuation matter on both sides of the deal.
The NRI rate: 12.5%, no indexation, no forex adjustment
For a non-resident, the long-term gain on unlisted shares has its own treatment. The shares are long-term if held more than 24 months, and the gain is taxed at 12.5% for a sale on or after 23 July 2024, up from the earlier 10%.
Two reliefs that apply elsewhere do not apply here. There is no indexation of the cost, and, specific to unlisted shares in a non-resident's hands, there is no foreign-exchange adjustment either, the gain is computed on the rupee figures without the currency-fluctuation protection that a non-resident gets on listed shares. So an NRI selling unlisted shares is taxed at a flat 12.5% on the plain rupee gain. A practising CA computes it correctly and, where the shares are old, applies the right cost so the gain is not overstated.
The TDS and the FEMA reporting layer
As with any sale by a non-resident, the buyer must deduct TDS under Section 195 on the gain embedded in the price, at the 12.5% long-term rate plus surcharge and cess. Because the buyer cannot easily compute your gain, a Form 13 lower-deduction certificate is the tool that gets the deduction set to your real gain rather than a heavy figure on the gross.
Unlisted shares carry an extra layer that listed trades do not: a transfer between a resident and a non-resident is a FEMA transaction, reported to the RBI through your bank on Form FC-TRS within the prescribed timeline, with the pricing required to be at or above fair value. So the sale has two compliance strands running together, the income-tax charge and the FEMA reporting, and a practising CA keeps both aligned so the deal closes cleanly and your money moves without a hold.