Long-term Capital Gains on debt oriented Mutual Fund and its qualification as Short-term capital asset

The existing provisions contained in clause (42A) of section 2 of the Act provides that 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. However, 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 or a unit of a Mutual Fund or a zero coupon bond, the period of holding for qualifying it as short-term capital asset is not more than twelve months.

The shorter period of holding of not more than twelve months for consideration as short-term capital asset was introduced for encouraging investment on stock market where prices of the securities are market determined.

Accordingly, it is proposed to amend the aforesaid clause (42A) of section 2 so as to provide that an unlisted security and a unit of a mutual fund (other than an equity oriented mutual fund) shall be a short-term capital asset if it is held for not more than thirty-six months.

These amendments will take effect from 1st April, 2015 and will accordingly apply, in relation to the assessment year 2015-16 and subsequent assessment years.

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Category : Income Tax (27866)
Type : Articles (17574)
Tags : Budget (1957) Budget 2014 (172) Capital Gain (407) Long Term Capital Gain (152)

One response to “Holding period increased to 36 Month for Unlisted shares and non Equity oriented mutual funds For LTCG Calculation”

  1. Yatin Sharma says:

    1st april ,2015 means AY 15-16.In Income Tax Amendements are always applicable in context of Assessment year(unless otherwise specified).

  2. s sudarshana says:

    The write of this article may clarify about the effective date for this amendment. …effective from 1st April 2015.” means what?

  3. s sudarshana says:

    This is the only negative feature of this budget, if I may say so. What about those who have invested earlier in FMPlans and gettng the maturity value this financial year?

  4. Kumar says:

    If this amendment will be effective from 1st April, 2015, then it should apply to financial year 2015-2016 (Assessment year 2016-2017) and not AY 2015-2016 as mentioned in this article.

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