# Holding period: Meaning, calculation and forms

A holding period refers to the duration for which you hold the securities in your demat account. It starts from the date you purchase securities until you sell them. So, for instance, if you bought shares of any company on 10th December 2019 and sold them on 10th December 2022, your holding period will be 3 years. But why must you calculate the holding period? The two main objectives of calculating holding period are:

• To calculate returns generated by an investment
• To determine capital gains tax obligations on your investments

Now that we’ve looked at the definition of holding period, let’s check how to calculate it to determine taxes and returns.

## How to calculate holding period return?

Every experienced investor calculates the holding period return to correctly determine the final returns they will receive on the investment.

You can use the following formula to calculate the holding period returns:

Return = ([Income + (EOPV – IV)] /IV) * 100

EOPV = End Of Period Value

IV = Initial Value

It is important to note that the returns are calculated by adding all the income from the investments, including dividends you received from the company.

## Understanding capital gains with holding period

The tax on capital gains after selling the shares is determined by whether the asset is held for a short or long term. Capital gain is the profit you earn after selling your assets. Taxation laws consider this profit as "income," and everyone is liable to pay a capital gain tax on this income.

Capital gains are of two types:

• Short-term capital gains
• Long-term capital gains

For investment in equity, a holding period of a maximum of 12 months is called a short-term position. On the other hand, long-term positions have a holding period of more than 12 months. Profits on sale of stocks are taxed differently depending on whether they are short-term or long-term. For instance, if you earn a profit of ₹10,000 in both short-term and long-term positions, the taxes will vary based on the time period for which you held both the stocks.

In India, the tax on long-term capital gains is 10%, and you will be taxed if your capital gains are above ₹1 lakh. If you held the stocks for more than 12 months, but your returns are less than ₹1 lakh, you will not be taxed.

In the case of a short-term capital gain, the applicable tax is 15% if the Securities Transaction Tax is applicable. And if it is not applicable, then short-term capital gains are taxed as per the applicable income tax slabs.

Furthermore, there are two types of capital gain tax on debt mutual funds:

• Short-term capital gain on debt mutual funds
• Long-term capital gain on debt mutual funds

Investments held for less than 3 years in debt funds are subject to short-term capital gain. The tax levied in this case is calculated on the investor’s income tax slab rate. On the other hand, long term capital gain tax will be liable if the holding period for this investment is more than 3 years. These earnings are taxed at a rate of 20%, additional surcharges and cess as applicable are liable to be paid.

Apart from taxation and returns, the holding period is also vital to determine whether you are applicable for dividend payments or not. The companies, while announcing dividends, also set a minimum holding period in order to access the dividends. Without fulfilling this criterion, you will not be eligible for your dividends.

## Conclusion

The holding period is one of the essential components in stock investing as it helps you compare the returns from different stocks and make a relevant strategy to achieve the highest potential returns. Therefore, without analysing the holding period, you will be losing out on a simple way to make the best investment decisions, which will eventually impact your profits while selling the stocks.

As we understand, time management is crucial. With this understanding, m.Stock enables you to create an account and start trading in under 5 minutes. So create your demat account today!

## Frequently Asked Questions

Minimum holding period refers to the continuous period of days for which an investor needs to purchase and hold securities. For instance, some equity instruments stipulate a minimum holding period for the investor to be eligible to receive dividends.

If you sell stocks within 1 year of purchase, it will be considered a short-term position for tax purposes. However, if you hold the stocks for more than 1 year, it will be considered a long-term position. On the other hand, debt mutual funds held for less than 3 years are considered short-term positions, and debt mutual funds held for over 3 years are considered long-term positions.

Yes, holding period return can be negative depending on the final price while selling the stock. For instance, assume that you purchased 10 shares one year ago for ₹2,000 per share. If the current market price is ₹1,000 per share, the holding period return can be calculated as follows:

Return = ([ 0 + (10,000 – 20,000)] /20,000) * 100

Return= (-10,000/20,000) * 100

Return= -50%

08 August,2024

## What Is Short Selling In Stock Market

Investors tend to use a variety of strategies to maximise their gains in the stock market. Short selling is one such approach that is often reserved for more experienced and risk-tolerant traders. So, what is selling short on the stock market? Simply put, it is selling shares that you do not own and hoping that their price will fall. Let us take a look at what short selling is in the share market, understand how this strategy works and discover the specific circumstances that can make it rewarding...

08 August,2024

## Stock vs Share: Key Differences, Types and Investment Advice

Understanding the differences between stocks and shares is essential for anyone considering investing in the stock market. Despite being used interchangeably, there are slight yet significant differences between these two terms. This blog tries to clarify the concepts of stocks and shares, highlight their main differences, and explore their different types...

08 August,2024

## Bonds vs. Stocks: A Beginner’s Guide

Investing in financial markets can often become overwhelming due to the multiple options available, especially for beginners. Understanding the difference between stocks and bonds is crucial for making informed investment decisions. Both these financial instruments offer unique benefits and risks, and knowing their distinct characteristics can help you build a balanced and diversified portfolio. This guide will explore the fundamental aspects of the bond market versus the stock market, detail the differences between stocks, shares, and bonds...

## Open your Lifetime Free Brokerage Account

• +91
Have a partner code?
T&C and privacy policy

## Power your investments with our smart trading platforms

• 10 million+
App downloads
• 1-Click
Order Placement
• 2,203 Crore+
Average Daily Turnover
Download App
Beware of fake groups impersonating m.Stock: Please be vigilant against fake apps, messages, or any communication claiming to be from us. Always verify through our official channels. If you encounter anything suspicious, please report it immediately via email, to help@mstock.com. Stay safe and protect your information. Please be vigilant against fake apps, messages, or any communication claiming to be from us. Always verify through our official channels. If you encounter anything suspicious, please report it immediately via email, to help@mstock.com.
Stay safe and protect your information.

Registered Office & Correspondence Address:
1st Floor, Tower 4, Equinox Business Park, LBS Marg, Off BKC, Kurla (W), Mumbai – 400 070
CIN Number : U65990MH2017FTC300493

Investments in securities market are subject to market risks. Read all the related documents carefully before investing. Brokerage will not exceed SEBI prescribed limits. Statutory Charges/Taxes would be levied as applicable.

Compliance Officer: Mr. Kalpesh Patel (Stock Broking and DP Activities) Email - compliance.officer@mstock.com, Tel No: - 022-41887777

Mirae Asset Capital Markets (India) Private Limited (“MACM”) offer its online retail stock broking services under brand m.Stock
Registration Details: SEBI Stock Broker Registration No.: INZ000163138 – Membership in BSE – Cash and F&O Segment (Clearing Member ID: 6681), BSE Star MF Segment (Membership No : 53975) and in NSE – Cash, F&O and CD Segments (Member ID: 90144), Membership in MCX – (Member ID: 56980), SEBI Merchant Banking Registration No.: MB/INM000012485, SEBI Research Analyst Registration No.: INH000007526, SEBI DP Registration No: IN-DP-589-2021, CDSL DP ID: 12092900, CIN: U65990MH2017FTC300493. AMFI Registered Mutual Funds Distributor: ARN-188742.Tele No: 18002100818. In case of any grievances, please write to help@mstock.com
*Special Administrative Region of the People's Republic of China
**Account would be opened after all procedure relating to IPV and client due diligence is completed.
^MTF is subject to the provisions of SEBI Circular CIR/MRD/DP/54/2017 dated June 13, 2017 (as amended from time to time) and the terms and conditions mentioned in rights and obligations statement issued by MACM

Mutual Fund Directory
Built with ❤️ in India | Copyright © 2024 - 2025, m.Stock By Mirae Asset Capital Markets (India) Pvt Ltd