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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products

Under the Income-tax Act as applicable to FY 2024-25 onwards, a resident individual sells listed equity shares after holding them for 18 months and Securities Transaction Tax (STT) is paid on both purchase and sale. How is the gain classified?

The gain is a long-term capital gain, because listed equity shares held for more than 12 months qualify as long-term assets. The 24-month period applies to unlisted shares, not to listed equity shares, so an 18-month holding is long-term.

  1. AShort-term capital gain, because the holding is under 24 months
  2. BLong-term capital gain, because listed equity shares held for more than 12 months are long-termCorrect
  3. CBusiness income, because all equity sales are business income
  4. DIncome from other sources, because the shares are listed

Explanation

Listed equity shares are long-term assets if held for more than 12 months. At 18 months, the gain is a long-term capital gain. The 24-month test applies to unlisted shares and some other assets, not listed equity.

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