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Section 2(42A) Explanation 1. Period of Holding

(a) in the case of a share held in a company in liquidation: The period subsequent to the date on which the company goes into liquidation shall be excluded.
(b) Asset acquired through gift, inheritance etc: The period for which the asset was held by the previous owner shall be included.
(c) Shares / Securities: The period shall be reckoned from the date of allotment of such financial asset.
(d) Right entitlement: The period shall be reckoned from the date of the offer of such right till the date when such right is renounced by the person.
(e). Purchasers of the securities from the market: The holding period shall be reckoned from the date of the broker’s note for purchase on behalf of the investors.
(f) Transactions between the parties and not through stock exchanges: The date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds.
(g) Securities acquired in lots at different points of time: 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 could not be correlated through specific numbers of the scrips.
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. Indexation, wherever applicable, for long-term assets will be regulated on the basis of the holding period determined in this manner.
(h) Allotment of shares in amalgamated Indian company in lieu of shares held in amalgamating company Section 47(vii): The period for which the share or shares in the amalgamating company were held by the assessee shall be included.
(i) Issue of shares by the resulting company to the shareholders of demerged company in a scheme of demerger: The period shall be counted from the date the shares are held in the demerged company.
(j) The period for which the capital asset was held by the amalgamating company shall also be considered in determing the period of holding of such asset by the amalgamated company.

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FAQs on Period of Holding - Taxation - Income Tax for assessment (Inter Level)

1. What is the period of holding for taxation purposes?

Ans. The period of holding refers to the length of time an individual or entity holds an asset before it is sold or disposed of for taxation purposes. It is used to determine the tax treatment of capital gains or losses from the sale of assets.

2. How is the period of holding calculated for taxation?

Ans. The period of holding is calculated by measuring the time between the date of acquisition and the date of disposal of an asset. It is usually measured in years, months, or days, depending on the specific tax regulations of the relevant jurisdiction.

3. What is the significance of the period of holding in taxation?

Ans. The period of holding is significant in taxation as it determines the tax rate that applies to any capital gains or losses realized from the sale of assets. In many jurisdictions, assets held for a longer period are eligible for preferential tax rates or exemptions.

4. Are there any specific rules or exemptions related to the period of holding for taxation?

Ans. Yes, different jurisdictions may have specific rules or exemptions related to the period of holding for taxation purposes. For example, some countries may offer tax exemptions for assets held for a certain minimum period, or they may impose higher tax rates for assets held for a short period.

5. How does the period of holding affect the taxation of investments?

Ans. The period of holding can have a significant impact on the taxation of investments, especially in relation to capital gains tax. Generally, assets held for a longer period may qualify for lower tax rates or exemptions, encouraging long-term investment strategies. On the other hand, assets held for a short period may be subject to higher tax rates, discouraging short-term speculation.

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Dec 20, 2024 Last updated

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