How to determine Period of Holding - Income Tax - Ready Reckoner - Income Tax

Determination of period of holding of an asset A holding period is the amount of time the investment is held by an investor, or the period between the purchase and sale of a security, The holding period of an investment is used to determine the taxing of capital gains or losses. Different Situations How to calculate the period of holding Right Shares From the date of allotment of right shares. Bonus Shares From the date of allotment of bonus shares. Shares held in a company-in-liquidation The period subsequent to the date on which the company goes into liquidation shall be excluded. Capital asset which becomes the property of the assessee in the circumstances mentioned in section 49(1) read with section 2(24A) [i.e. when an asset is acquired by gift, etc.) The period for which the asset was held by the previous owner should be included. Units of a business trust (allotted pursuant to transfer of shares) The period of holding shall include the period for which shares were held by the assessee. Units which become the property of the assessee in consideration of transfer referred to in Section 47(xviii) The period of holding shall include the period for which the unit or units in the consolidating scheme if the mutual fund were held by the assessee. Membership right held by a member of recognised stock exchange:- (i) Trading or clearing rights of recognised stock exchange pursuant to its demutualisation or coporatisation (ii) Equity share in a company acquired by a person pursuant to the demutualisation or coporatisation of recognised stock exchange. The period of holding shall be considered from the date of becoming member of stock exchange Sweat equity shares allotted by employer The period of holding shall be reckoned from the date of allotment or transfer of such equity shares. Shares in a company (acquired by non-resident assessee on redemption of Global Depository Receipts referred to in section 115AC(1)(b) held by such assessee) The period shall be reckoned from the date on which a request for such redemption was made. Transfer in shares and securities not given above Date of purchase (through stock exchange) of shares /securities Date of purchase by broker on behalf of investor Date of transfer (through stock exchange )of shares and securities Date of broker s note provided such transaction are followed up by delivery of shares and also the transfer deeds. Date of purchase /transfer of shares /securities (transfer taken place directly between parities and not through stock exchanges) Date of contract of sale as declared by parties provided it is followed up by actual delivery of shares and the transfer deeds. Date of purchase/ sale of shares /securities purchase in several lots at different points of time but delivery taken of in one lot and subsequent sold in parts The first in-first out (FIFO) method shall be adopted to reckon the period of the holding of the security,in cases where the dates of purchase and sale cannot be correlated through specific number of the scrip .In other words the assets acquired last will be taken to be remaining with the assessee while assets acquired first will be treated as sold Transfer of a security by a (i.e. demat, accounts) depository The period of holding shall be determined on the basis of the first in first out method. Period of holding where equity shares are received on conversion of preference shares The Act inserted clause (xb) in sec 47 to provide that this conversion shall not be regarded as transfer, Therefore, period include period prior to conversion. Period of holding where equity shares are received on conversion of debentures or bonds The Act inserted clause (x) in sec 47 to provide that this conversion shall not be regarded as transfer, Therefore, period include period prior to conversion. Period of holding in case of a capital asset which become the property of the Indian subsidiary company in consequence to conversion of a branch of a foreign company referred to in section 115JG(1) Include the period for which the asset was held by the said branch of the foreign company and by the previous owner. Period of holding of the units in the consolidated plan of mutual fund scheme Period of holding shall include the period for which the units in consolidating plan of mutual fund scheme were held by the assessee. Capital asset referred to in clause (via) of section 28 The period shall be reckoned from the date of its conversion or treatment.