Latest on what a Short Term or Long Term Capital Asset is

Published On - October 24, 2014

admin Capital Asset, Income Tax

Generally speaking, when you hold a Capital Asset for 36 months or less – it is a Short Term Capital Asset.
However, the following assets will be Short Term Capital Assets if held for 12 months or less  (when transferred/sold after 10th July 2014 ) –

  • Equity or preference shares listed in a recognized stock exchange in India.
  • Securities (like debentures, bonds, Govt Securities etc) listed in a recognized stock exchange in India
  • Units of UTI, whether quoted or not.
  • Units of Equity Oriented Fund (whether quoted or not) – and therefore Debt Funds will be now be considered Short Term when held for 36 months or less.
  • Zero coupon bonds, whether quoted or not.

This rule is applicable if date of transfer is after 10th July – irrespective of what the date of purchase is. (Scroll down to the bottom to read in detail).
Any Asset other than those listed above is a Long Term Capital Asset.
In case an asset is acquired by gift, will, succession or inheritance – the period this asset was held by the previous owner is also included when testing whether it’s a short term or a long term capital asset.In case of Bonus Shares or Rights Shares the period of holding is counted from the date of allotment of bonus shares or Rights Shares respectively.
In detail 10th July 2014, is the date of implementation of budget announcement, with respect to changes in the Capital Gains section. Therefore, as against other tax changes (personal taxation- those are effective 1st April 2014), these changes are effective 10th July 2014. Any sale or redemptions on or before 10th July 2014 will have the old provisions. Here are the old provisions applicable when transfer takes place on or before 10th July 2014 – Following Assets are considered Short Term when held for 12 months or less.

  • Equity or preference shares, whether shares are quoted or not.
  • Securities (for eg debentures, bonds or Govt Securities)
  • Units of UTI, whether quoted or not
  • Units of Mutual Funds, whether quoted or not – therefore, all Mutuals funds under the old provisions, were considered Short Term when held for 12 months or less.
  • Zero Coupon Bonds, whether quoted or not