InvestorQ : Can you explain the concept of mutual fund holding period to me?
Debbie Mascarenhas made post

Can you explain the concept of mutual fund holding period to me?

Answer
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Crowny Pinto answered.
1 year ago


The basic motivation behind investing in mutual funds is to earn dividends and capital gains. Capital gains represent the excess of the redemption value over the purchase value and are taxed by the income tax authorities. The amount of tax to be paid on capital gains depends on the time for which you stay invested in them. It is referred to as the holding period of mutual funds.

The holding period of mutual fund units can be short-term or long-term. In case of equity mutual funds and balanced mutual funds (with minimum 65% holdings in equities), the holding period of 12 months or more is regarded as long-term. In case of debt (non-equity) mutual funds, a holding period of 36 months or more is regarded as long-term. A holding period of less than 36 months for debt (non-equity) funds and less than 12 months for equity and balanced funds is defined as short-term.

Let us capture these differences in a table, for the assessment year 2019-20.

Funds

Short-term

Long-term

Equity funds

Less than 12 months

12 months and more

Balanced funds

Less than 12 months

12 months and more

Debt funds

Less than 36 months

36 months and more