With a view to curb tax disputes, India's income tax department has decided that income from sale of unlisted shares would be treated as capital gains and taxed at a lower rate than business income, an official statement said on Thursday.

"Central Board of Direct Taxes gives directions to its field formations that the income arising from transfer of unlisted shares, irrespective of period of holding, would be taxable under the head 'Capital Gain', except in certain circumstances where the assessing officer would examine the issue and take appropriate view," said a finance ministry statement.

"It is expected that there would be much-needed certainty and predictability regarding taxability of income arising from transfer of shares. Consequently, due to uniformity in approach, tax disputes and litigation on this issue would reduce substantially," it added.

Capital gains on sale of unlisted shares attract long term capital gain tax at 20 percent with indexation benefit, while business income is taxable at a slab rate which can be as high as 30 percent, and without indexation.

Short term capital gain on sale of unlisted securities is taxable at 15 percent.