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

A resident individual's PMS portfolio sells listed equity shares after holding them for 8 months. Under the capital gains rules as taught in the NISM XXI-A syllabus, how is the gain classified?

The gain is a short-term capital gain. For listed equity shares the holding period threshold is 12 months, and an 8-month holding falls below it. Being listed does not make a gain long-term or exempt, and PMS trading does not change the classification.

  1. ALong-term capital gain, because the shares are listed
  2. BShort-term capital gain, because the holding period is 12 months or lessCorrect
  3. CBusiness income, because PMS is a managed service
  4. DExempt income, because the shares are listed and traded on a recognised exchange

Explanation

Listed equity shares held for more than 12 months give long-term gains; otherwise they are short-term. An 8-month holding is short-term, and PMS trading does not by itself convert the gain into business income or make it exempt.

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