Is a listed bond still a long-term asset only after three years, and what about units of a listed business trust? My client transferred both in late 2024.
From 23 July 2024 there are only two holding periods: twelve months for all listed securities and twenty-four months for everything else. The thirty-six month period is gone, so units of a listed business trust move from thirty-six months to twelve, and bonds, debentures and gold move from thirty-six months to twenty-four; unlisted shares and immovable property stay at twenty-four.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-07-23, reported as Section 3(b) of the Finance (No. 2) Act, 2024 (Act 15 of 2024); section 2(42A) of the Income-tax Act, 1961 as amended; Memorandum explaining the provisions in the Finance (No. 2) Bill, 2024, 'Rationalisation and Simplification of taxation of Capital Gains', paragraph 1. It bears on section 2(42A), section 112A, section 111A, section 112, section 48, section 50AA of the Income Tax Act 1961, in Capital Gains and How Tax Law Is Read matters.
The holding period decides whether section 112A or section 111A applies at all, and the change is dated to the transfer, not to the acquisition — so an asset bought under the old rules can qualify as long-term on a transfer made on or after 23 July 2024 that would have been short-term a week earlier. The trap runs the other way too: guidance written before July 2024 will tell a reader that a listed debenture needs thirty-six months, which is wrong for a transfer on or after that date.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Before the Finance (No. 2) Act 2024 the Act used three holding periods — twelve months for listed equity shares and certain securities, twenty-four months for unlisted shares and immovable property, and thirty-six months for everything else including listed business trust units, bonds, debentures and gold. The 2024 rationalisation reduced these to two.
There are two holding periods only, twelve months and twenty-four months, for determining whether a capital gain is short-term or long-term; twelve months for all listed securities and twenty-four months for all other assets, with effect from 23 July 2024.
The Memorandum identifies the change as the first of three components of the capital gains rationalisation and records the specific consequences: units of a listed business trust come to par with listed equity shares at twelve months instead of thirty-six; the holding period for bonds, debentures and gold reduces from thirty-six months to twenty-four; and for unlisted shares and immovable property it remains at twenty-four.
Firstly, it is proposed that there will only be two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gains or long term capital gains. For all listed securities, the holding period is proposed to be 12 months and for all other assets, it shall be 24 months.
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Handle my notice → Ask a CA on WhatsAppFrom 23 July 2024 there are only two holding periods: twelve months for all listed securities and twenty-four months for everything else. The thirty-six month period is gone, so units of a listed business trust move from thirty-six months to twelve, and bonds, debentures and gold move from thirty-six months to twenty-four; unlisted shares and immovable property stay at twenty-four. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 2(42A), section 112A, section 111A, section 112, section 48, section 50AA of the Income Tax Act 1961. It is reported as Section 3(b) of the Finance (No. 2) Act, 2024 (Act 15 of 2024); section 2(42A) of the Income-tax Act, 1961 as amended; Memorandum explaining the provisions in the Finance (No. 2) Bill, 2024, 'Rationalisation and Simplification of taxation of Capital Gains', paragraph 1. The holding period decides whether section 112A or section 111A applies at all, and the change is dated to the transfer, not to the acquisition — so an asset bought under the old rules can qualify as long-term on a transfer made on or after 23 July 2024 that would have been short-term a week earlier. The trap runs the other way too: guidance written before July 2024 will tell a reader that a listed debenture needs thirty-six months, which is wrong for a transfer on or after that date. If it applies to you, the first step is this: For every transfer in FY 2024-25, note the transfer date against 23 July 2024 before you classify the gain as short or long term.
Before the Finance (No. 2) Act 2024 the Act used three holding periods — twelve months for listed equity shares and certain securities, twenty-four months for unlisted shares and immovable property, and thirty-six months for everything else including listed business trust units, bonds, debentures and gold. The 2024 rationalisation reduced these to two. The matter was decided on 2024-07-23 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. There are two holding periods only, twelve months and twenty-four months, for determining whether a capital gain is short-term or long-term; twelve months for all listed securities and twenty-four months for all other assets, with effect from 23 July 2024.
The Memorandum identifies the change as the first of three components of the capital gains rationalisation and records the specific consequences: units of a listed business trust come to par with listed equity shares at twelve months instead of thirty-six; the holding period for bonds, debentures and gold reduces from thirty-six months to twenty-four; and for unlisted shares and immovable property it remains at twenty-four. In the words reproduced by the source cited on this page: "Firstly, it is proposed that there will only be two holding periods, 12 months and 24 months, for determining whether the capital gains is short-term capital gains or long term capital gains. For all listed securities, the holding period is proposed to be 12 months and for all other assets, it shall be 24 months."
It was decided by the CBDT Circulars & Instructions on 2024-07-23 and is reported as Section 3(b) of the Finance (No. 2) Act, 2024 (Act 15 of 2024); section 2(42A) of the Income-tax Act, 1961 as amended; Memorandum explaining the provisions in the Finance (No. 2) Bill, 2024, 'Rationalisation and Simplification of taxation of Capital Gains', paragraph 1. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 2(42A), section 112A, section 111A, section 112, section 48, section 50AA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. There are two holding periods only, twelve months and twenty-four months, for determining whether a capital gain is short-term or long-term; twelve months for all listed securities and twenty-four months for all other assets, with effect from 23 July 2024. It arises in Capital Gains and How Tax Law Is Read matters, on section 2(42A), section 112A, section 111A, section 112, section 48, section 50AA of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Re-check any FY 2024-25 classification made on a thirty-six month rule — listed business trust units, listed bonds and debentures are the ones most often mis-classified. Having fixed the character, then pick the rate: section 111A or section 112A for STT-paid listed equity and equity-oriented units, section 112 otherwise, again split at 23 July 2024. Do not carry indexation into a long-term computation for a transfer on or after 23 July 2024 without checking the position for that class of asset — the Memorandum records removal of the second proviso to section 48 indexation as part of the same package.
Still good law. The clause as amended was read on the Income Tax Department's current section 2 page, stamped Year '2024 (No. 2)', and independently against section 3(b) of the enacted Finance (No. 2) Act, 2024 (Act 15 of 2024) in the Gazette. The two agree. No amendment later than that Act was searched for. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The enacted clause was read on two independent routes. The Income Tax Department's current section 2 page is at https://incometaxindia.gov.in/w/section-2-65, stamped Year '2024 (No. 2)', and prints clause (42A) as amended: twenty-four months in the opening portion, twelve months in the first proviso for a listed security, a unit of the Unit Trust of India, a unit of an equity oriented fund or a zero coupon bond, with the words '(other than a unit)' gone and the third proviso omitted. Section 3(b) of the enacted Finance (No. 2) Act, 2024 (Act 15 of 2024, assented 16 August 2024), read verbatim from the Gazette at https://egazette.gov.in/WriteReadData/2024/256436.pdf, makes exactly those four changes 'with effect from the 23rd day of July, 2024'. The Government's Memorandum to the Bill, quoted here, is consistent with both. The Memorandum also records that unlisted debentures and unlisted bonds are brought to tax at applicable rates through section 50AA with effect from 23 July 2024 — that is outside this slice and has not been verified here. 'decided_on' is the date from which the amendments take effect, not a decision date. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
There are two holding periods only, twelve months and twenty-four months, for determining whether a capital gain is short-term or long-term; twelve months for all listed securities and twenty-four months for all other assets, with effect from 23 July 2024.
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