Speculation has been rife of the government planning to raise the period of holding of equity shares for calculation of long-term gains. Instead of allowing holding period of more than one year to qualify as long-term gain, three years of holding may be considered. While there is no way to read in to finance ministerArun Jaitley’s mind beforehand, it may be worthwhile to understand the implications if that happens and the reasons for this anticipated change.
In Budget 2014, the finance minister raised the period of holding for debt funds from one year to three years to qualify for long-term capital gains. Possibly preparing the investor for the road ahead? Equity shares and equity mutual funds are the only capital assets that enjoy a shorter holding period of one year. All other capital assets are considered long-term when held for longer than three years. Also these are the only assets which enjoys tax-free long-term gains. The period of less than 12 months (instead of 36 months) for being considered as short term capital asset for listed securities was introduced in the assessment year of 1995-96. These tax rules have been in place since many decades.
