Meaning of short-term capital asset modified [Section 2(42A)] [W.e.f. A.Y. 2015-16]
The existing provisions contained in section 2(42A) provides that short-term capital asset means a capital asset held by an assessee for not more than thirty six months immediately preceding the date of its transfer. However, proviso to section 2(42A) provides that in case of the following assets, the period shall be twelve months instead of thirty six months:
(a) share of a company
(b) any other security listed in a recognized stock exchange in India
(c) a unit of Unit Trust of India or a unit of a Mutual Funds specified u/s 10(23D)
(d) a zero coupon bond
The shorter period of holding of not more than twelve months for consideration as short-term capital asset was introduced for encouraging investment on stock market where prices of the securities are market determined.
Accordingly, the above proviso to section 2(42A) has been amended so as to provide that the period of twelve months shall be applicable only in case of following assets:
(a) a security (other than unit) listed in a recognised stock exchange in India
(b) a unit of an equity oriented fund
(c) a zero coupon bond
In other words, unlisted securities (including shares), units of a mutual fund (other than an equity oriented mutual fund) and units of newly proposed business trusts shall be a short-term capital asset if it is held for not more than 36 months instead of 12 months.
Period of holding of unlisted shares and units transferred on or after 01- 04-2014 but before 11-07-2014: The Act has inserted second proviso to section 2(42A) to provide that unlisted share of a company or a unit of a mutual fund specified u/s 10(23D) which is transferred during the period beginning on 01- 04-2014 and ending on 10-7-2014 shall be a short-term capital asset if it is held for not more than 12 months instead of 36 months mentioned in the above amended proviso.
Consequent amendment has also been made in section 112.
Amendment made by the Finance (No. 2) Act, 2014 [W.e.f. 01-10-2014]
In determining the period for which capital assets is held by the assessee, the following sub-clause (hc) has been inserted in Explanation 1 to section 2(42A) to provide that: "In the case of a capital asset, being a unit of a business trust, allotted pursuant to transfer of share or shares as referred to in section 47(xvii), there shall be included the period for which the share or shares were held by the assessee." [See also Point no. 54]
1. For the purposes of this clause, the expression "security" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 [Explanation 2 to section 2(42A)]
2. As per Section 2(h) of Securities Contracts (Regulation) Act, 1956, unless the context otherwise requires, "securities" include—
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;
(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes; (ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(id) units or any other such instrument issued to the investors under any mutual fund scheme;]
(ie) any certificate or instrument (by whatever name called), issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgag debt, as the case may be;
(ii) Government securities;
(iia) such other instruments as may be declared by the Central Government to be securities; and
(iii) rights or interest in securities