What Is Short-Term and Long-Term Capital Gain?
Capital gains are generally classified as short-term or long-term according to the applicable holding-period rules for the asset. The Income Tax Department provides different holding periods for different categories of assets.
Quick Answer
Short-term and long-term status is determined by the applicable holding period for the asset. Listed securities and certain equity-oriented mutual funds use a shorter holding-period test than many other assets.
Why Is the Classification Important?
The short-term or long-term classification can affect the applicable tax rate, computation provisions and the way the gain is reported in the ITR.
Holding Period Is Asset-Specific
The Income Tax Department's guidance identifies different holding periods for listed shares and certain securities, unlisted shares and immovable property. The relevant rule should be checked for the specific asset.
Listed Equity Shares
For the relevant listed equity shares, the Income Tax Department's guidance uses 12 months as the holding-period threshold for long-term classification.
Unlisted Shares
The Income Tax Department's guidance identifies 24 months as the holding-period threshold for unlisted shares.
Land and Building
Immovable property such as land or building is generally subject to a 24-month holding-period test for long-term classification under the applicable rules.
Important
Holding-period rules have changed over time and can depend on the asset and transfer date. Use the rules applicable to the year of transfer.
Frequently Asked Questions
Is 12 months the long-term period for every asset?
No. The holding period depends on the type of capital asset.
How long must I hold an unlisted share for long-term classification?
The Income Tax Department's current ITR guidance identifies 24 months for unlisted shares.
How long must I hold property for long-term classification?
The Income Tax Department's guidance identifies 24 months for immovable property such as land or building.
Related EZTax Resources
- What Is AIS (Annual Information Statement) in Income Tax?
- AIS vs Form 26AS: What Is the Difference?
- Does AIS Show Capital Gains?
- AIS Reconciliation and AI-Powered Income Tax Filing with EZTax
- Capital Gains Income Tax Guide
Official Sources
For current capital-gains and ITR guidance, refer to the Income Tax Department resources for the relevant assessment year.
