# Determining the Period of Holding in Special Situations
Explanation 1(i) to Section 2(42A) lays down how to compute the period of holding in specific circumstances. The common theme: where an asset is acquired through a 'previous owner' situation or a conversion/reorganisation, the earlier holding period is generally included.
| # | Circumstance | Period of Holding rule |
|---|---|---|
| 1 | Shares held in a company under liquidation | Exclude the period after the date of liquidation |
| 2 | Asset acquired by the assessee under Section 49(1) (gift, will, inheritance, etc.) | Include the previous owner's holding period |
| 3 | Conversion of inventory into capital asset | Count from the date of conversion into capital asset |
| 4 | Right shares & bonus shares | Count from the date of allotment |
| 5 | Specified security or sweat equity shares allotted/transferred | Count from the date of allotment or transfer |
| 6 | Rights renouncement (by original shareholder) | Count from the date of offer by the company |
| 7 | Shares in Indian amalgamated company acquired under amalgamation [47(vii)] | Include the period the shares in the amalgamating company were held |
| 8 | Shares in Indian resulting company acquired under demerger | Include the period the shares in the demerged company were held |
| 9 | Conversion of bonds/debentures/debenture-stock/deposit certificates into shares or debentures | Include the period such assets were held prior to conversion |
| 10 | Conversion of preference shares into equity shares [47(xb)] | Include the holding period of the preference shares |
| 11 | Electronic Gold Receipt (EGR) [47(viid)] — gold converted into EGR | Include the period the gold was held prior to conversion |
| 11 | Gold released against an EGR | Include the period the EGR was held prior to conversion into gold |
## Memory aids
- Bonus/right shares and sweat equity start from allotment — NO benefit of any earlier period.
- Rights renouncement (where the original shareholder sells the right entitlement) starts from the date of the company's offer.
- In succession/reorganisation cases (gift, inheritance, amalgamation, demerger, conversions), you add back the earlier holding period.