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CA Intermediate · Taxation · Capital Gains

Meera, a resident individual, bought 2,000 unlisted equity shares of a private company on 1 August 2024 and sold them on 15 June 2026 for a profit. How should the gain be classified for tax year 2026-27?

The gain is short-term. Unlisted shares count as long-term assets only if held for more than 24 months, and Meera held them for about 22.5 months. The 12-month holding test applies only to listed securities and does not help here.

  1. AShort-term capital gain, because unlisted shares are long-term only if held for more than 24 monthsCorrect
  2. BLong-term capital gain, because the shares were held for more than 12 months
  3. CLong-term capital gain, because the shares were held for more than 36 months
  4. DShort-term capital gain, because shares of private companies are always short-term assets

Explanation

Unlisted shares become long-term capital assets only when held for more than 24 months. From 1 August 2024 to 15 June 2026 is about 22.5 months, so the gain is short-term. The 12-month test applies to listed securities, not to unlisted shares.

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