There are two holding periods. Listed securities are long-term after twelve months, everything else after twenty-four, and the thirty-six month tier is gone. The commencement is fixed by the date of transfer, not by the assessment year: the CBDT's own note says the new provisions "come into force from 23.7.2024 and shall apply to any transfer made on or after 23.7.2024". For the rate and indexation consequences see cost-of-acquisition-and-indexation.
Before the Finance (No. 2) Act 2024 the classification ran on three tiers. Section 2(42A) defines a short-term capital asset as one "held by an assessee for not more than thirty-six months immediately preceding the date of its transfer", and its provisos cut that down for particular classes. The first proviso substituted twelve months for thirty-six "in the case of a security (other than a unit) listed in a recognized stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of an equity oriented fund or a zero coupon bond". A later proviso substituted twenty-four months "in the case of a share of a company (not being a share listed in a recognised stock exchange in India), or an immovable property, being land or building or both". Everything not caught by either proviso - gold, unlisted debentures, foreign shares, listed units of business trusts - sat on thirty-six months.
That structure is what collapsed. The CBDT's note on the 2024 changes puts it flatly: "There are only two holding periods,- for listed securities, it is one year, for all other assets, it is two years." It then works through what actually moved. "The holding period of all listed assets will be now one year. Therefore, for listed units of business trusts (ReITs, InVITs) holding period is reduced from 36 months to 12 months." And: "The holding period of gold, unlisted securities (other than unlisted shares) is also reduced from 36 months to 24 months", while "The holding period of immovable property and unlisted shares remains the same as earlier i.e. 24 months."
So the two categories that mattered most to individuals - a flat and shares in a private company - did not change at all. What changed is the long tail: gold, foreign securities, and listed units of business trusts.
Unlisted bonds and unlisted debentures are a separate story, and they left the holding-period test altogether on the same day. The memorandum to the Finance (No. 2) Bill 2024 states that "Unlisted debentures and unlisted bonds are proposed to be brought to tax at applicable rates by including them under provisions of section 50AA of the Act", and that "This amendment in section 50AA shall come into effect from the 23rd day of July, 2024." Section 50AA deems the gain on transfer, redemption or maturity of the assets it covers to be capital gains from the transfer of a short-term capital asset irrespective of the period of holding. So for an unlisted bond or debenture transferred on or after 23 July 2024, there is no twenty-four month test to run - the gain is short-term however long it was held. (The department's section page for s.50AA still serves the pre-amendment text, which names only market linked debentures and specified mutual funds; the extension to unlisted bonds and debentures is taken from the budget memorandum.)
Be exact about the commencement, because this is where returns go wrong. It is not an assessment-year switch and it is not a financial-year switch. The CBDT states that the new provisions "come into force from 23.7.2024 and shall apply to any transfer made on or after 23.7.2024". Financial year 2024-25 therefore straddles two regimes: a transfer on 22 July 2024 is governed by the old classification and the old rates, and a transfer on 23 July 2024 by the new. The date on the deed or the contract note decides it, and for property that means the date of transfer as fixed under s.2(47), which the corpus covers at what-is-a-transfer-and-when.
The tacking rule is unchanged and is easy to lose. Explanation 1 to s.2(42A) provides that "in the case of a capital asset which becomes the property of the assessee in the circumstances mentioned in sub-section (1) of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section". So for property received on gift, will, inheritance or partition of an HUF, you count the previous owner's holding as well as your own, and an inherited flat sold a month after the death is almost always long-term. The corpus has the parallel point on cost at cit-v-manjula-j-shah-indexation and on dematerialised shares at date-of-acquisition-of-dematerialised-shares, and the allotment-letter point for flats at holding-period-of-a-flat-runs-from-the-allotment-letter.
One warning about sources. The text of s.2(42A) served by the department's own section pages still reads "thirty-six months" with the old provisos and does not carry the 2024 amendment, so it cannot be used to verify the current wording. The position stated above is taken from the CBDT's note on the changes as published by the Press Information Bureau. Check the current bare Act before quoting the section in an appeal.
What follows from classification - the 12.5% rate, the removal of indexation, and the resident individual and HUF comparison for land or building acquired before 23 July 2024 - is set out at cost-of-acquisition-and-indexation and is not repeated here.
Classification decides the rate, the set-off pool and whether s.54, s.54F or s.54EC are open at all, and for financial year 2024-25 it decides all of that twice within one year depending on which side of 23 July the transfer falls. The assets that moved are the ones nobody checks - gold and listed REIT and InvIT units - and a sale of gold held for twenty-eight months that was short-term under the old law is long-term under the new. Unlisted bonds and debentures moved further still: from the same date they are outside the holding-period test entirely, under s.50AA.
The Assessing Officer wants to tax what my client received on redemption of stock appreciation rights granted by the foreign parent as a perquisite. Is there Supreme Court authority on this?
I handed over possession of my factory and the buyer credited me with the price, but the sale deed came much later. In which year did I make the capital gain?
The company redeemed my preference shares and paid me the face value. Is that a transfer, or just a repayment?
My land was notified and an award was made under the Land Acquisition Act, but I thought the award was too low, negotiated a higher figure and executed a sale deed. The Assessing Officer now says that was a voluntary sale and denies s.10(37). Is he right?
I sold my firm's business to a company as a going concern for one lump sum. Is the surplus on plant and machinery still taxable as a balancing charge?
My mortgaged property was auctioned and the department kept what I owed it out of the proceeds. Do I pay capital gains on the whole price or only on what reached me?
We sold the goodwill our own firm built up over the years. It cost us nothing to acquire. Is the price taxable as a capital gain?
Our JDA was never registered and the project collapsed. Am I still taxed on capital gains?
Every page in this library links to what it was written from, so you can check it rather than take our word for it.
