Determine the period of holding for Capital assets

Under the capital gain the period of holding is an important criteria to determine Long term capital gain and Short term capital gain. Capital gain is taxable either a short-term capital gain or a long-term capital gain. The short-term capital gain means a capital asset which is held by the taxpayer for not more than 36 months prior to the date of transfer. Any asset which is not short-term capital asset is termed Long-term capital assets. Generally, the period of holding should be more than 36 months to be an asset long-term capital asset, however in the following cases period should be more than 12 months to become a long-term capital asset:

Types of Capital AssetsPeriod of Holding
Listed Equity or Preference shares12 months
Unlisted Equity or Preference shares24 months
Immovable property (being land or building or both)24 months
Listed or Unlisted Unit of UTI12 months
Zero Coupon bonds (Listed or Unlisted)12 months
Unit of Debt oriented mutual funds (Listed or Unlisted)36 months
Unit of equity-oriented mutual fund12 months

While determining of period of holding, questions arise that the date from where the period holding will count, what will be the date of transfer, Number of days will be included in the period of holding and many other questions for the income tax consultant in Gurgaon. We at Nitin Bhatia and Associates can help you with LLP Registration in Gurgaon, company registration in Gurgaon and to make the answer simple we are here to summarise the different situations from where period of holding counts:

S.No.Types of Capital assetsCalculate period of holding
 Right SharesPeriod of holding shall be counted from the date of allotment of Right Shares
 Right EntitlementPeriod of holding shall be taken from the date of offer to subscribe to shares to the date when right entitlement is renounced
 Bonus SharesPeriod of holding shall be counted from the date of allotment of Bonus Shares
 Sweat equity shares by employerPeriod of holding shall be counted from the date of allotment or transfer of equity shares
 Share held in a company-in-liquidationPeriod subsequent to the date on which company goes into liquidation shall be excluded
 Where assets is acquired by Will, Gift, Succession, inheritance, etc.Holding period of previous owner shall be included.
 Conversion of inventory into a capital assetPeriod of holding starts from the date of conversion into a capital asset
 Conversion of preference shares into equity sharesPeriod of holding shall be counted from the date of acquisition of preference shares.

Capital assets on which 15% income tax is levied.

There are only 3 short-term capital assets covered under section 111A on which 15% tax is charged:

  • Equity shares
  • Units of equity oriented mutual-funds*
  • Units of business trust

*Equity oriented mutual fund means a mutual fund specified under section 10(23D) and 65% of its investible funds, out of total proceeds are invested in equity shares of domestic companies.

** Deduction of sections 80C 80U are not available from short-term capital assets if securities transactions tax is charged.

Exemption of Slab benefit to Individual or HUF-

Short term capital gain is taxable at the rate of 15% plus cess, however, resident individual or HUF can claim the benefit of the slab rate as given below.

StatusExemption limit
For resident individual age of 80 years or moreRs. 5,00,000
For resident individual age of 60 years or more but less than 60 yearRs. 3,00,000
For resident individual age below 60 yearsRs. 2,50,000
For Non-resident individualRs. 2,50,000

It is important to note that non-residents can claim the benefit of slab rate up to Rs. 2.5 lakhs. When Non-resident is a senior citizen, he/she can only take the benefit of basis slab i.e 2.5 lakhs. Slab benefits applicable to senior citizen or super senior citizen are applicable only to residents Individual.

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To know more about capital gain you can contact income tax consultant in Gurgaon or click the following links:

1. Relevant provisions applicable to the NRI selling property in India

2. Income tax on sale of listed Equity shares (Section-111A)

3. Procedure to remittance/transfer of money out of India

4. Exemption of long-term capital gain on sale of residential house property- section 54

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