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Period for holding Capital Assets for Calculation

If shares or equity, MFs are held for less than 12 months before selling, the gain arising is classified as Short Term Capital Gain

If shares or equity MFs are held for more than 12 months before selling, the gain arising is classified as Long Term Capital Gain.

All Other Capital Assets

Short Term Capital Gain (STCG)

If the capital asset is held for less than 36 months before selling, the gain arising from it is classified as Short Term Capital Gain

Capital asset roughly means property – a house, an apartment, office space, factory, godown or a plot of land.

Regards

Defination of short term is an inclusive defination i. e. it states that Section 2(42A) [“short-term capital asset” means a capital asset held by an assessee for not more than [thirty-six] months immediately preceding the date of its transfer :]

              [Provided that in the case of a share held in a company [or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of a Mutual Fund specified under clause (23D) of section 10] [or a zero coupon bond], the provisions of this clause shall have effect as if for the words “thirty-six months”, the words “twelve months” had been substituted.]

and long term capital asset is defined u/s 2(29A)  “long-term capital asset” means a capital asset which is not a short-term capital asset. So if the period of holding exceeds 12 months then the same is to be long term capital asset and hence gains will be long term capital gains.

So twelve months ended on 23rd April, 2008 and sold on 24th. So holding period exceeds 12 months which is held for more than 12 months and hence the resultant gain would be long term

Yes, Amir bhai,

A

One day should be excluded because the delivery on purchase will take place only on 24th april 2007 evening at settlement of that day.

The scrip leaves the demat acccount the moment you put it on "sell" on 24th april 2008.

So, the time gap is there which means one of the days should be excluded.

B

Even more importantly,

every person loses his right in the asset on the day of its transfer itself,

not from the next day...

So technically, u have no right in the share on 24th April 2008 to call it a part of period of holding.

Hence The period is exactly 12 months, not greater than 12 months.

But i think that this could be more of an academic debate than one which will be looked into in the real world....

So i guess my answer's changed too..... STCG........... :(

long term...........

long term

Dear G. K.

Short term asset is the one held for less than 12 months. So the asset has completed 12 months as you have agreed which is not less than 12 months. So it should be long term. It is like a calendar year which starts from 01.01 to 31.12 not 01.01.

And the share also leaves the demat account atleast one or two days after if you technically see that settlements on exchange are settled in T + 2 days not on the same day

Aditya Sir, my apologies and thanks for giving the information of T+2 settlement.

 (i was thinking that settlement would be on the same day, someone told me that t+2 settlement is no longer possible..)

But it's 12 months only the period of holding as we have come to agree, and as per the proviso,

if the period is not more than 12 months, it is a short term capital asset.

Here it is a short term asset like Amir has pointed out..

The date of transfer should not be counted in computing the period of holding (for any assets).... but for indexation purpose we can include the date of transfer.

If the asset is short term then how indexation will be possible?

Aditya sir, its short term so indexation is not possible.. thats correct...

Wht i meant abt indexation was -

suppose an asset is transferred, then excluding the day of transfer is only for the purpose of determining the period of holding,

but we can take the CII, as the CII of the financial year in which the transfer date falls...

That is to sum up, exlcding the date of transfer is for limited purpose of determining the period of holding.

If the date of sale for shares is to be ignored then say if you purchased a share today and sell it tomorrow then it would construed as sale on the same day and hence instead of capital gains the gain would be speculation gain then.

My question is why to ignore the date of sale?

Hi Aditya Sir

This is a limited purpose exercise....

To determine period of holding, we exclude one day. So we dont count the day of transfer.

That's all.. suggested correctly by amir bhai also...

Suppose the asset in question is land

We are buying it on 1st april 2010, and registering the on that date at 10 a.m.

The [legal] presumption is that from 12.00 am (00:00 hours) on 1st april 2010, the land has become ours, and we have inherited all rights over that land from 12 a.m.

We are selling it on 2nd april 2010, and registering at 9.30 a.m.

The presumption is that from 12 a.m. (00:00) on 2nd april, we have given up all the rights over that land.

That is to say that we legally hold the right in the asset on 1st april for whole day, but we dont hold it on 2nd april at all. So the period of holding is one day. (00:00 hrs 1^st april to 00:00 hrs 2^nd april)

Hope I am able to put my thought across properly

Dear Aditya Sir,

Ur question was -

Why date of sale is to be excluded from "Period of holding"..

The term "Period of holding" has not been used in the Act but it is a well known term.....

Now lets focus on the defination of Short Term Capital asset -

Sec 2(42A) -

short-term capital asset” means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer

So the definition itself requires that for the purpose of deciding whether asset is a Short Term or Long Term "the date of transfer of asset shall not be considered"

Now ur second query - Sir what makes Intraday transactions as "Speculative" is a fact that they are settled "without delivery" & not that the two events "purchase & sale happens on same day"

Lets take example of Gold - I buy it on 01.04.2010 & also sells it on same day. Deliveries are effected in both the transactions. Now will you say it is a "Speculative Transaction"???

No, the same is the case with shares...........

G.K. Bhai sry for misguiding you thru PM........:(

I know the defination of short term capital asset which was posted earliear, i am just asking the logic and telling that for a BTST transaction the number of days held will be zero and hence it should go into speculation income then.

Also the asset is held for 12 months which is not less than 12 months. So the asset should become long term. If you read the defination it says it should be less than 12 months which could be said 364 days or 365 days in case of leap year. So in this case the asset has been held for 366 days as it is a leap year even if you ignore the last date and also 12 months completed is not less than 12 months.

So it should be long term.