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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Mutual Funds

An investor holds units of an equity-oriented mutual fund and sells them 18 months after purchase at a profit. For tax purposes in India, how is this gain classified under the Income-tax law currently taught in the NISM X-A syllabus?

The gain is a long-term capital gain, because units of an equity-oriented mutual fund held for more than 12 months qualify as long-term. An 18-month holding exceeds that threshold. The 24 and 36 month limits apply to other asset types, not equity-oriented funds.

  1. AShort-term capital gain, as holding is below 24 months
  2. BLong-term capital gain, as holding exceeds 12 monthsCorrect
  3. CBusiness income, as units are traded
  4. DShort-term capital gain, as holding is below 36 months

Explanation

For equity-oriented funds, units held for more than 12 months give long-term capital gains. At 18 months the holding exceeds 12 months, so the gain is long-term. The 24-month and 36-month thresholds apply to other asset classes, such as unlisted shares and non-equity assets under older rules.

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