Computation of Period of Holding

In general, period of holding implies the period for which the asset is owned by an assessee or held by an assessee as owner. It starts from the day when the asset is acquired by the assessee and ends on the day when it is sold/disposed off/transferred otherwise. Under capital gains, the period of holding of capital asset before the date of transfer is important to determine the nature of capital gain i.e. short team/long team capital gain. Hence, the day on which capital asset is transferred is not to be counted in the period of holding. Thus, if a capital asset is acquired by an assessee on April 1, 2011, the period of holding of 12 months/36 months shall be completed on March 31, 2012/March 31, 2014.

However, in certain specified cases, the period of holding shall be calculated after including/ excluding a certain period as provided therein. These cases are as follows:

(i) Shares held in a company in liquidation. While calculating period of holding of shares, the period subsequent to the date on which the company goes into liquidation is to be excluded.

(ii) Capital asset acquired by specified modes mentioned in Section 49(1). In the case of a capital asset which becomes the property of an assessee in the circumstances mentioned in section 49(1) i.e. under gift, will, succession, inheritance etc., the period for which the asset was held by the previous owner shall be included.

(iii) Shares acquired in Indian amalgamated company. In the case of a share in an Indian company which becomes the property of the assessee in a scheme of amalgamation, the period for which the share in the amalgamating company was held by the assessee shall be included.

(iv) Shares acquired in Indian resulting company. In the case of a share in an Indian resulting company which becomes the property of the assessee in a scheme of demerger, the period for which the share in the demerged company was held by the assessee shall be included.

(v) Trading or clearing rights or shares. In the case of a capital asset, being (i) trading or clearing rights of recognised stock exchange in India acquired or (ii) equity shares or shares in a company allotted by a person pursuant to demutualisation or corporatisation of the recognised stock exchange in India [as referred to in section 47(xiii)], there shall be included while calculating the period of holding of trading or clearing rights, the period for which the person was a member of the stock exchange in India immediately prior to such demutualisation or corporatization.

(vi) Specified security or sweat equity shares. In the case of a capital asset, being any specified security or sweat equity shares, allotted or transfered directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employees), the period shall be counted from the date of allotment or transfer of such specified security or sweat equity shares.

(vii) Acquisition of shares by a non-resident on redemption of GDRs. In the case of shares in a company accquired by a non-resident assessee on redemption of Global Depository Receipts (GDRs) referred to in Section 115AC(a)(b) held by such an assessee, the period of holding shall be reckoned from the date on which a request for such redemption was made.

(viii) Conversion of preference share into equity share. In the case of conversion of preference shares into equity shares, the period of holding of equity shares shall include the period for which the preference shares were held by the assessee [W.e.f. A.Y. 2018-19].

(ix) Units acquired in the consolidated mutual fund plan. The period of holding of the units of consolidated plan of mutual fund scheme shall include the period for which the units in consolidating plan of mutual fund were held by assessee [W.e.f. A.Y. 2018-19].

(x) Conversion of Inventory into capital asset. For such a capital asset, the period of holding shall be reckoned from the date of its conversion or treatment [W.e.f. A.Y. 2019-20].