NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Taxation
Rohit, a resident individual, redeems units of a listed equity-oriented mutual fund scheme after holding them for 14 months. For tax purposes, how is the gain classified?
The gain is long-term capital gain, because units of an equity-oriented mutual fund held for more than 12 months qualify as long-term assets. Fourteen months exceeds that threshold. The 24-month period applies to other asset classes, not to equity-oriented funds.
- AShort-term capital gain, as the holding is under 24 months
- BLong-term capital gain, as the holding exceeds 12 monthsCorrect
- CBusiness income, as redemption is a frequent activity
- DIncome from other sources
Explanation
For equity-oriented funds, units held for more than 12 months are long-term assets. At 14 months the gain is therefore long-term capital gain. The 24-month test applies to other asset types, so option one is wrong.
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