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

Mr. Iyer's PMS sold listed equity shares after holding them for 18 months, realising a gain of Rs 2,00,000. Treat this as the only capital gain for the year, with no other exemptions available. For tax purposes this gain is classified as:

The gain is a long-term capital gain. Listed equity shares held for more than 12 months qualify as long-term assets, and 18 months exceeds that threshold, so the profit is not short-term unless the activity is treated as business trading.

  1. AShort-term capital gain
  2. BLong-term capital gainCorrect
  3. CBusiness income always
  4. DIncome from other sources

Explanation

Listed equity shares held for more than 12 months are long-term assets. Holding for 18 months exceeds 12 months, so the gain is a long-term capital gain. Classifying it as short-term would be wrong because the 12-month threshold is crossed. Treating it as business income applies only where the activity is trading in nature.

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