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Holding period, cost of acquisition, and when tax applies
Published by The Retail Trader · JUL 23, 2026 · Features
The profit you make on selling a share is taxed, and the calculation follows a simple structure. Rates keep changing, but the structure stays the same.
A holding period is fixed for every asset class. If you hold for less than that period the gain is treated as short term, and if you hold for more, as long term.
The tax treatment of the two is different, and equity, debt, gold and property all have their own rules.
To work out the gain you need these things:
• Sale value — what you received.
• Cost of acquisition — what you paid, along with transaction charges.
• Holding period — the time between buying and selling.
• Corporate actions — the cost is adjusted after a bonus, split or demerger.
Tax applies when there is a gain, not when you merely sell — and a gain arises only when the position is closed. So selling at the end of the year only to "book profit" creates a new tax event that would not otherwise exist.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics are changed from time to time by the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.