NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products
Under the Income-tax Act as applicable to listed equity shares, a resident individual sells listed equity shares on a recognised stock exchange after holding them for 8 months, and Securities Transaction Tax has been paid on the sale. How is the gain classified?
The gain is a short-term capital gain, because listed equity shares sold within 12 months of purchase are treated as short-term assets. A holding of eight months does not cross the 12-month threshold needed for long-term classification.
- AShort-term capital gainCorrect
- BLong-term capital gain
- CBusiness income only
- DExempt income
Explanation
Listed equity shares held for 12 months or less are short-term assets. Eight months is below the 12-month threshold, so the gain is a short-term capital gain. It is not long-term, which needs a holding of more than 12 months.
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