What conditions does a stock exchange need to follow to be recognised?
Under the Income-tax Rules, 2026, the government has laid down detailed conditions for a stock exchange to qualify as a recognised stock exchange for derivatives trading under section 2(92). Exchanges must have prior approval from SEBI and operate in line with its regulations, while ensuring robust client-level data capture, including PAN and unique client IDs.
They are required to maintain a complete audit trail of all cash and derivatives transactions for seven years, with strict safeguards to prevent deletion of records and allow modifications only in cases of genuine errors.
Additionally, exchanges must maintain detailed logs of any modified transactions and submit a monthly statement to the Director General of Income-tax (Systems) within 15 days of the end of each month, reinforcing tighter oversight and transparency in trading activity.
Holding period for assets, What counts and from when
The Income-tax Rules, 2026 clarify how the holding period of assets will be calculated in specific cases to determine whether gains are short-term or long-term. For converted securities such as shares or debentures, the holding period will include the time for which the original instrument—like bonds, debentures or deposit certificates—was held before conversion.
For assets declared under the Income Declaration Scheme (IDS), 2016, the treatment differs by type. In the case of immovable property, the holding period will start from the actual date of acquisition, provided it is supported by a registered deed. For other assets, the holding period will be counted from June 1, 2016.
In situations where assets are transferred to an Indian subsidiary from a foreign company’s branch, the holding period will include the time the asset was held by the foreign branch or even by the previous owner if it was acquired through specified modes.
The rules also clarify taxation of capital gains attributed to specified entities. Such gains will be treated as short-term if they relate to short-term assets, block of assets, or self-generated assets like goodwill. In all other cases, where the underlying asset qualifies as long-term at the time of taxation, the gains will be treated as long-term capital gains.