Taxation of any capital asset will depend on its period of holding. Period of holding means the time period for which capital assets have been held by the assessee, on the basis of the period of holding the capital asset will be categorised into short term capital assets and long term capital assets. Any capital asset which has been held for a long term period will be classified as a long term capital asset and will be taxed with the benefit of indexation while if any capital asset has been held for a short term period will be classified as a short term capital asset and will be liable for short term capital gain.
The period of holding of the capital asset will be calculated by its date of purchase known as the date of acquisition and the date on which sale or transfer has taken place, the example depicting this is as follows:
| Type of Asset | Immovable Property | ||
|---|---|---|---|
| Date of Transfer | 22.01.2022 | ||
| Date of Purchase | 04.12.2019 | ||
| Period of Holding | More than 2 years | ||
| Type of Capital Asset | Long Term | Result | (Period of holding of Immovable Property is more than 24 months, so it is a Long term Asset) |
Tax2win Period of holding of capital asset calculator is a simple tool that is useful for determining the nature of a capital asset, whether it is long term or short term. For this only date of acquisition and the date of sale of the capital asset are the only requirements which need to be provided as an input and in turn, the period of holding will be provided by the Period of holding of the capital asset calculator.
In order to use this calculator, one must know the date of purchase of the capital asset which is commonly known as the date of acquisition and the date of sale of the capital asset. These dates are the basic requirement through which the Tax2win period of holding of capital asset calculator will calculate the period of holding of the respective capital asset.
As per the Income Tax Act, the tax rates for long-term capital gain and short-term capital gain are different and so we need to determine whether the capital gain is long term or short term. This categorization of capital assets into short term or long term is done via its period of holding, so in order to determine the tax on capital assets, one requires a period of holding which is easily calculated by our Period of holding of capital asset calculator.
Any capital asset held by a person for more than 36 months (i.e., 3 years) immediately preceding the date of its transfer will be treated as a long-term capital asset.
However, in respect of certain assets like
the period of holding to be considered is 12 months instead of 36 months. In the case of unlisted shares in a company, the period of holding to be considered is 24 months instead of 36 months.
Also, with effect from Assessment Year 2018-19, the period of holding of immovable property (being land or building or both), shall be considered to be 24 months instead of 36 months.
Gain arising on transfer of the long-term capital asset is termed as long-term capital gain and gain arising on transfer of the short-term capital asset is termed as a short-term capital gain. However, there are a few exceptions to this rule, like gain on depreciable assets is always taxed as a short-term capital gain.
The tax rates for long-term capital gain and short-term capital gain are different; therefore, we need to determine whether the capital gain is long term or short term. In other words, the taxability of capital gain depends on the nature of gain, i.e. whether short-term or long-term. Hence to determine the taxability, capital gains are classified into short-term capital gain and long-term capital gain. Similarly, computation provisions are different for long-term capital gains and short-term capital gains.
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