The period of holding of a capital asset under income tax is the period between the date of its acquisition and the date of its transfer. The date of acquisition is different for different types of assets, as follows:

• Securities (shares, debentures, etc.): The date on which the assessee receives the intimation of allotment of shares or the date on which the shares are credited to the assessee’sdemat account, whichever is earlier.
• Immovable property: The date on which the sale deed is registered.
• Other capital assets: The date on which the asset is delivered to the assessee.

The period of holding is calculated in days, and includes both the date of acquisition and the date of transfer. For example, if you acquire a share on 2023-09-22 and sell it on 2024-09-23, the period of holding will be 366 days.

There are certain special cases where the period of holding may be different. For example, in the case of a bonus issue of shares, the period of holding of the bonus shares will be the same as the period of holding of the original shares.

The period of holding is important for determining the rate of capital gains tax. Capital gains are classified as long-term or short-term, depending on the period of holding of the asset. Long-term capital gains are taxed at a lower rate than short-term capital gains.

To determine the period of holding of a capital asset, you should keep track of the following dates:

• The date of acquisition of the asset
• The date of transfer of the asset
• Any other relevant dates, such as the date of allotment of shares in a bonus issue or the date of conversion of a capital asset into another asset
• EXAMPLE

To determine the period of holding of an asset with specific state in India, you need to consider the following:

• The type of asset. The period of holding is calculated differently for different types of assets, such as shares, debentures, immovable property, and gold.
• The date of acquisition. The period of holding is calculated from the day after the date of acquisition of the asset.
• The date of disposal. The period of holding is calculated up to the day of disposal of the asset.

Here are some examples of how to determine the period of holding with specific state in India:

Shares

The period of holding of shares is calculated from the day after the date of allotment of the shares to the date of sale of the shares. For example, if you were allotted shares on March 10, 2023, and you sell the shares on September 23, 2023, the period of holding will be 6 months.

Debentures

The period of holding of debentures is calculated from the day after the date of purchase of the debentures to the date of maturity of the debentures or the date of sale of the debentures, whichever is earlier. For example, if you purchase debentures on March 10, 2023, and the debentures mature on September 23, 2023, the period of holding will be 6 months. However, if you sell the debentures on August 23, 2023, the period of holding will be 5 months.

Immovable property

The period of holding of immovable property is calculated from the day after the date of registration of the property to the date of sale of the property. For example, if you register a property on March 10, 2023, and you sell the property on September 23, 2023, the period of holding will be 6 months.

Gold

The period of holding of gold is calculated from the day after the date of purchase of the gold to the date of sale of the gold. However, there is a special provision for gold that has been held for more than 36 months. If you sell gold that has been held for more than 36 months, the capital gains will be treated as long-term capital gains and taxed at a lower rate.

Specific state in India

The period of holding of an asset is the same regardless of the state in India in which the asset is located. However, there are some state-specific laws that may affect the taxation of capital gains. For example, some states have a stamp duty on the sale of immovable property.

FAQ QUESTIONS

What is the period of holding of a capital asset?

The period of holding of a capital asset is the period for which the asset is held by the taxpayer. It is calculated from the date of acquisition of the asset to the date of its transfer.

How is the period of holding calculated for different types of capital assets?

The period of holding is calculated differently for different types of capital assets. For example:

• Equity shares and units of equity-oriented mutual funds: The period of holding is calculated from the date of allotment of the shares or units.
• Debt shares and units of debt-oriented mutual funds: The period of holding is calculated from the date of allotment of the shares or units, or from the date of payment of the full consideration, whichever is later.
• Immovable property: The period of holding is calculated from the date of registration of the property in the taxpayer’s name.

What are the special rules for calculating the period of holding in certain cases?

There are special rules for calculating the period of holding in certain cases, such as:

• Demerger: In the case of a demerger, the period of holding of the shares of the demerged company is calculated from the date of acquisition of the shares of the demerging company.
• Bonus shares: The period of holding of bonus shares is calculated from the date of acquisition of the shares on which the bonus shares were issued.
• Gift: The period of holding of a capital asset received as a gift is calculated from the date of acquisition of the asset by the donor.
• Inheritance: The period of holding of a capital asset inherited from a deceased person is calculated from the date of acquisition of the asset by the deceased.

How is the period of holding calculated for capital assets acquired in multiple instalments?

In the case of capital assets acquired in multiple instalments, the period of holding is calculated from the date of acquisition of the first instalment.

How is the period of holding calculated for capital assets that are held jointly?

In the case of capital assets that are held jointly, the period of holding is calculated from the date of acquisition of the asset by the joint owner who acquired the asset first.

What are the implications of the period of holding for capital gains tax?

The period of holding is a relevant factor for determining the rate of capital gains tax. Capital gains are classified as either short-term capital gains or long-term capital gains, depending on the period of holding of the asset. Short-term capital gains are taxed at a higher rate than long-term capital gains.

How can I determine the period of holding of my capital assets?

You can determine the period of holding of your capital assets by maintaining a record of the dates on which you acquired and transferred the assets. You can also use the income tax return forms to track the period of holding of your capital assets.

CASE LAWS

IT v Rama Rani Kalia (2013) 358 ITR 499

The court held that the period of holding of a capital asset is to be reckoned from the date on which the assessee acquires the right to the asset, irrespective of whether he or she has acquired the legal ownership of the asset.

CIT Vs. Ved Prakash & Sons (HUF) 207 ITR 148

The court held that the term ‘held’ in the definition of capital asset is deliberately used as against the term ‘owned’. Hence, a person can hold the asset as owner, lessee, tenant, etc. Therefore, the right to the property is held by a person from the date when he enters into an agreement for purchase and not when he acquires possession.

CIT v M/s. Ramchand & Sons (2006) 286 ITR 412

The court held that the period of holding of a capital asset is to be reckoned from the date on which the assessee acquires the right to the asset, even if the asset is subject to a encumbrance.

CIT v M/s. Kedia Overseas Ltd. (2005) 279 ITR 872

The court held that the period of holding of a capital asset is to be reckoned from the date on which the assesses acquires the right to the asset, even if the asset is not in the physical possession of the assesses.

CIT v M/s. Vini Synthetics Ltd. (2002) 255 ITR 122

The court held that the period of holding of a capital asset is to be reckoned from the date on which the assesses acquires the right to the asset, even if the asset is not yet in existence.

In addition to the above, there are a number of other case laws on the determination of the period of holding of capital assets. The relevant case law will depend on the specific facts of the case.

It is important to note that the period of holding is different for different types of capital assets. For example, the period of holding for listed securities is 365 days, while the period of holding for unlisted securities is 24 months.