Holding Period

Holding Period – The holding period refers to the duration for which an asset, such as stocks, mutual funds, or property, is held by an investor before being sold or transferred. The holding period is a critical factor in determining the tax treatment of capital gains, distinguishing between short-term and long-term gains, each subject to different tax rates under the Income Tax Act. The Assessment Year (AY) is the year in which income earned during the preceding Financial Year (FY) is evaluated and taxed. Capital gains arising from the sale or transfer of assets during a FY are assessed in the corresponding AY.

Example: If an investor sells shares in FY 2022–23 (1 April 2022 – 31 March 2023), the capital gains—short-term or long-term, depending on the holding period—are reported and taxed in AY 2023–24.