NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation
Mr. Iyer, a resident individual, redeems units of an equity-oriented mutual fund scheme after holding them for 8 months. Which of the following describes the nature of his gain?
The gain is a short-term capital gain. For equity-oriented mutual fund units, the holding period must exceed 12 months to be long-term, and eight months falls below that threshold, so the profit is taxed as short-term capital gain.
- ALong-term capital gain, as equity units are always long-term
- BShort-term capital gain, as the holding period is 12 months or lessCorrect
- CBusiness income, as redemption is a trading activity
- DIncome from other sources
Explanation
For equity-oriented funds, units held for more than 12 months are long-term; units held for 12 months or less give short-term gains. At 8 months, the gain is short-term capital gain. Equity units are not automatically long-term.
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