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

Under the Income-tax law in force for FY 2024-25 and later, listed equity shares sold by a PMS client after being held for 18 months are classified as which of the following?

Listed equity shares held for 18 months are long-term capital assets, because the threshold for listed shares is more than 12 months. The 24-month period applies to other assets such as unlisted shares or land, so it does not apply to these shares.

  1. AShort-term capital asset, because the holding period is under 24 months
  2. BLong-term capital asset, because the holding period exceeds 12 monthsCorrect
  3. CBusiness asset, since the PMS trades actively
  4. DCapital asset taxed only on redemption of the PMS account

Explanation

For listed equity shares the holding period threshold for long-term classification is more than 12 months. Holding for 18 months therefore gives a long-term capital asset. The 24-month threshold applies to certain unlisted shares and immovable property, so option one is wrong.

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