Skip to content

NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation

Ravi redeems units of an equity-oriented mutual fund scheme after holding them for 8 months and makes a gain. How is this gain classified for tax purposes?

The gain is a short-term capital gain. For equity-oriented mutual fund units, the holding must exceed 12 months to qualify as long-term, and 8 months falls below that limit, so the gain is taxed under the short-term capital gains provisions.

  1. AShort-term capital gain, because equity-oriented units held for 12 months or less are short-termCorrect
  2. BLong-term capital gain, because any holding over 6 months is long-term
  3. CBusiness income, because the redemption is a frequent transaction
  4. DIncome from other sources taxed at slab rate

Explanation

For equity-oriented funds, the holding period threshold for long-term treatment is more than 12 months. At 8 months the gain is short-term capital gain. The 6-month rule applied to listed shares in the past and does not apply here.

Did you get it right without looking?

One question tells you little. A timed set on Taxation shows your real accuracy, how long you take and where you lose marks.

Practise TaxationFree diagnostic mock

More Taxation questions