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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Taxation (NISM XXI-A)

A resident individual sells listed equity shares through a PMS account after holding them for 8 months. How are the gains classified for tax purposes?

The gain is a short-term capital gain. Listed equity shares must be held for more than 12 months to be long-term. At 8 months the threshold is not met, and routing the trade through a PMS does not alter the classification.

  1. ALong-term capital gain, because the shares are listed
  2. BShort-term capital gain, because listed equity shares held for 12 months or less are short-termCorrect
  3. CBusiness income, because a PMS is involved
  4. 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 holding period is below this, so the gain is a short-term capital gain. Using a PMS does not change the character of the gain, and the listing does not make it long-term by itself.

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