InvestorQ : What is the meaning of short term capital asset and long term capital asset?
Sam Eswaran made post

What is the meaning of short term capital asset and long term capital asset?

Answer
user profile image
swati Bakhda answered.
1 year ago


For the purpose of taxation, capital assets are classified into two categories as given below:

Short term capital asset

Long term capital asset

Any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer will be treated as short-term capital asset.

However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months. That means, such assets will be short term capital assets if held for less than 12 months.

There have been some modifications to the period of holding definition in the last 2 budgets. Period of holding for short term capital asset to be considered as 24 months instead of 36 months in case of unlisted shares of a company or an immovable property being land or building or both. Any capital asset held by the taxpayer for a period of more than 36 months (except in case of some exceptions explained above) immediately preceding the date of its transfer will be treated as long-term capital asset. Equity is an exception!