NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)
A PMS client sells listed equity shares from the portfolio after holding them for 8 months. Under the current rules, how is the gain classified?
The gain is a short-term capital gain. Listed equity shares must be held for more than 12 months to be long term, and 8 months falls short of that. Using a portfolio manager does not alter the holding-period test.
- ALong-term capital gain, because it was held through a portfolio manager
- BShort-term capital gain, because listed equity held for 12 months or less is short termCorrect
- CBusiness income by default for all PMS investors
- DIncome from other sources
Explanation
For listed equity shares the holding period threshold for long-term treatment is more than 12 months. At 8 months the gain is short term. Use of a portfolio manager does not change the holding-period classification.
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