A smallcap bought over 2021 has not traded since March. The app still lists it, still shows a price from the last day anybody managed to deal in it, and still folds an unrealised loss of ₹1,38,900 into the portfolio total. Elsewhere in the same year you have booked a long-term gain, and the obvious thing to do is put one against the other. So you go to sell, and there is no sell — there is no market to sell into, no buyer, and no order the exchange will accept. The position is real, the loss feels entirely real, and there is nothing to report on a tax return, because the rules ask a question the screen has never been asked: has anything actually happened to these shares?
Your cousin borrowed ₹2 lakh for a business that failed four years ago. Everyone in the family accepts you will not see it again, and you stopped counting it long ago. But nothing has actually happened to the debt: you have not written it off, not settled it for a smaller sum, not assigned it to anybody. Deciding privately that money is gone is a feeling, and it is not an event that any record anywhere reflects.
A worthless share is the same. It sits in your demat account at the full cost you paid, and the tax rules recognise a loss when the asset is transferred — sold, cancelled, extinguished — not when it stops being worth anything. Worthlessness is a state. A loss needs an event.
Three ways the market ends, and what each leaves you holding
| What has happened | What it means for the holding | What you can actually do |
|---|---|---|
| Suspension of trading | The exchange has stopped the market in the security, usually for persistent non-compliance. Your ownership is untouched — the shares sit in your demat account exactly as before | Wait, and watch the exchange's own notices rather than the app. Suspensions are revoked when the company complies, and they also precede most compulsory delistings |
| Compulsory delisting | The exchange has removed the company for persistent non-compliance. You now hold shares in an unlisted company, and there is no screen at all | The promoters are required to acquire the public shareholders' shares at a value fixed by an independent valuer. That exit is claimed from the company and its registrar, on notices, not on a trading platform |
| Insolvency | The company is in a tribunal-supervised process. Equity is the residual claim and ranks last, so a resolution plan very often cancels it or dilutes it to almost nothing | Nothing, as a shareholder, other than follow the filings. The one thing worth watching for is the date the equity is actually extinguished, because that date is when your loss finally exists |
A loss needs a transfer
A capital loss is computed on a transfer, in the same way and at the same moment as a capital gain would be. Transfer is defined widely — it includes a sale, an exchange, a relinquishment, and the extinguishment of the rights in an asset — but every item on that list is an event with a date. A share that has merely become worthless has had no event. It has a cost, it has an acquisition date, and it has nothing else, which is why the number the app is showing you cannot be put on a return.
| What has happened to the shares | Is it a transfer? | When the loss arises |
|---|---|---|
| The price collapsed and the shares are still in your account | No | Not yet. Nothing is deductible, however certain the outcome looks |
| Trading is suspended and there is no buyer | No | Not yet. Being unable to sell is not the same as having sold |
| The shares are cancelled or reduced to nil under an approved resolution plan, or under a tribunal-sanctioned capital reduction | Yes — the rights in the asset are extinguished | On the effective date of the scheme. Keep the order or the company's intimation, because the date is the whole of the evidence |
| The company is wound up and whatever is left is distributed to shareholders | Not by the ordinary test — the distribution is expressly not a transfer by the company, and a separate provision charges the shareholder instead | On the distribution, computed against what you actually receive — usually nothing. Because it runs on its own provision rather than the general one, this is the case to take advice on rather than to file on instinct |
| A genuine off-market sale to a real buyer at a defensible price | Yes | On the transfer, subject to the valuation point in the warning below |
| You gift the shares to a relative to get them off the books | No — a gift is expressly outside the definition | Never. No loss arises for you at all, and the recipient inherits your cost and your holding period |
What a dead holding costs while you wait
- The account cannot be closed with a security in it. A demat account is closed only against a nil balance, so one unsellable line keeps an account — and its charges — alive indefinitely. This is the practical reason people discover these holdings: they surface when somebody tries to consolidate accounts.
- The annual maintenance charge continues. A Basic Services Demat Account carries nil or reduced charges up to prescribed value thresholds, and the eligibility condition is what decides whether it helps — it is open only to somebody whose one demat account, as sole or first holder, is that account. So it does not do the thing people reach for it to do: a residual account kept alongside a live trading account does not qualify, and neither does the trading account. It earns its keep in the opposite case, where the dead line is the last thing left and the account exists for nothing else. Where two accounts have to stay open, the question for the depository participant is what a dormant account with no transactions actually costs, which is often less than the headline charge.
- The evidence has to outlive the broker. The loss may become claimable years after you stopped dealing with the broker who executed the purchases. Download the contract notes, the ledger and the holding statement now — a closed relationship is a slow way to obtain a document you need in a filing season.
- Check the status at the source, not on the app. Exchanges publish their lists of suspended securities and the notices that revoke a suspension, and a company in a tribunal process files there too. A price frozen on an app is not a status, and an app will happily show a last traded price for years.
Module checkpoint: what the record says
5 questions. Answers are revealed once you submit all of them.
1.Shares bought in 2019 receive a one-for-one bonus allotted in March 2026, and the entire holding is sold in June 2026. Which statement is correct?
2.You receive shares in a demerged company. How are the cost and the holding period treated, compared with a bonus?
3.A share certificate stands in the name of a holder who died in 2021. His daughter holds a demat account of her own. What is the first step towards being able to sell?
4.A dividend has been returned unpaid every year since 2018 because the registered bank account was closed. It is now 2026. What is the position?
5.A holding bought for ₹1.8 lakh has not traded for two years and the company is in insolvency. You have long-term gains this year. Can you claim the loss?
2021 mein 6,000 share ₹30 ke = ₹1,80,000. March se trading band. App abhi bhi ₹6.85 ka bhaav dikha kar ₹41,100 ki value aur ₹1,38,900 ka nuksaan bata raha hai — aur is saal aapke paas long-term gain bhi hai jispe set-off karna hai. Par is saal kuch bhi claim nahi hoga, kyunki loss "value girne" pe nahi, "transfer" pe banta hai. Share bekaar ho jaana ek haalat hai; loss ke liye ek ghatna chahiye. Bhai ko gift kar dene se toh bilkul nahi milega — gift transfer maana hi nahi jaata, ulta aapka cost aur holding period saamne wale ko chala jaata hai. Aur "cousin ko ₹1 mein bech do" wala jugaad bhi ulta padta hai: jo share ab quoted nahi hai, uspe kam keemat ki jagah prescribed fair value laga di jaati hai, aur lene wale pe alag se tax. Jis saal resolution plan se equity cancel hogi, us saal poora ₹1,80,000 ka long-term loss milega — long-term gain ke saamne — aur return time pe file kiya toh 8 saal tak carry forward. Tab tak ek baat aur: jab tak yeh share account mein hai, demat account band bhi nahi hota aur AMC katti rehti hai.
- Suspension ends the market, not the ownership — the shares stay in your demat account and the last traded price stops meaning anything.
- A capital loss arises on a transfer. A share that has merely become worthless has not been transferred and nothing is deductible.
- Cancellation or extinguishment under an approved plan is a transfer, and its effective date is the date of your loss.
- A gift to a relative produces no loss for you and passes your cost and holding period to them; a nominal off-market sale can have a prescribed fair value substituted for the price.
- A demat account cannot be closed while any security sits in it, so a dead holding keeps an account and its charges alive.
Mark it done to track your progress through the curriculum.