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

Ms. Rao's PMS portfolio holds a listed equity share bought for Rs 80,000 that is sold at Rs 1,00,000 after 8 months. Under the general capital gains framework applicable to listed equity shares on which STT is paid, how is this gain classified?

The gain is a short-term capital gain of Rs 20,000. Listed equity shares held for 12 months or less are short-term, and the 8-month holding is below that threshold. Holding through a PMS does not change the classification.

  1. ALong-term capital gain of Rs 20,000, because the holding period exceeds 6 months
  2. BShort-term capital gain of Rs 20,000, because the holding period is 12 months or lessCorrect
  3. CBusiness income of Rs 20,000, because it arose in a PMS
  4. DExempt income, because the gain is below Rs 1,00,000

Explanation

For listed equity shares, a holding period of up to 12 months gives a short-term capital gain. Eight months is below 12, so the Rs 20,000 gain (1,00,000 - 80,000) is short-term. The 6-month period applied to older rules and does not apply here, and being in a PMS does not change the nature of the gain.

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