Define and differentiate between the Short term Capital Asset and Long term Capital Asset.

Short-term Capital Asset [Sec. 2(42A)] : It is an asset held by the assessee for not more than 36 months, immediately prior to the date of transfer. In other words, any asset held by the assessee for 3 years or less on the date of transfer is short-term capital assets. But the following assets shall be deemed to be short-term capital assets if they are held by the assessee for not more than 12 months—

  • Share (Equity or Preference) of a company; listed in a recognized stock exchange.
  • Securities (Debentures Government Securities etc.) listed in a recognized stock exchange in India.
  • Units of an equity oriented fund,
  • Zero coupon bond.

Long-term Capital Asset [Sec. 2(29A)] : Asset other than short-term capital asset is along -term capital asset. In other words, where the asset is held by the assessee for more than 36 months (12 months in case of shares/securities listed on a recognized stock exchange, units of equity oriented fund and zero coupon bonds) on the date of transfer is along -term capital asset. Any profit arising from the transfer of long-term capital asset is a ‘long- term capital gain.

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