I am aware that a stock held for over 365 days will be a Long Term stock.
My question is - since when are the stocks held counted for the number of days - from the purchase date or from the 3rd day of purchase ?
To clarify, if I purchased a stock on 1 Jan 2016, would it become a long term stock if I hold it till 1 Jan 2017 or do I have to hold it till 4th Jan 2017 ?
The settlement cycle does not come into picture here. You require to hold a stock for 365 days to be exempt from capital gain tax. So you should sell it only on the 366th day or afterwards to be exempt from tax.
Suppose you buy a stock on 1 Jan 2017, you start holding it from the next day onwards. So you have to start counting your holding period from 2 Jan 2017. On 1 Jan 2018, you complete holding for 365 days. Now you can sell the stock from 2 Jan 2018 onwards and you will be exempt from taxes on your gains.
Thank you for the clarification
Are you asking about the Grandfathering rule?
Purchase and sale before 31/1/2018:
Exempt under Section 10(38)
Purchase before 31/1/2018 and Sale after 31/1/2018 but before 1/4/2018
Exempt under Section 10(38)
Purchase before 31/1/2018 and Sale on or after 1/4/2018
LTCG taxable. Gains accrued before 31/1/2018 exempt
Purchase after 31/1/2018 and Sale on or after 1/4/2018
LTCG taxable
No…I am asking from when the counting of days start for treating an equity investment as long term (i.e. how to count 365 days)…Is it the day on which we bought the stock, or from the next day or from t+2 day ?
I never thought about that too much, but it is so relevant. I would say it has to be the day one buys the stock, thats the day we pay for it, the day the price of it was. But let’s call on the ever reliable @Quicko for a quickie 
on this…
As per Income Tax Department Circular: No. 704, dated 28-4-1995, the date of purchase of securities is used -
22. Instructions regarding determination of the ‘date of transfer’ and holding period for purposes of capital gains qua transactions in securities
1. Under the provisions of clause (42A) of section 2 of the Income-tax Act, 1961, the shares held in a company or any other security listed in a recognised stock exchange in India or units of the Unit Trust of India or units of a mutual fund specified under section 10(23D) shall be regarded as short-term capital assets if they are held by an assessee for not more than 12 months immediately preceding the date of its transfer. Clarifications have been sought as to which date should be regarded as the date of transfer and also about the date from which the holding period of the securities should be reckoned. Clarifications have also been sought as to how the holding periods will be computed for the purposes of capital gains when the securities, purchased in several lots at different points of time and which are taken delivery of in one lot, are subsequently sold in parts and no correlation of the dates of purchase and sale is available.
2. When the securities are transacted through stock exchanges, it is the established procedure that the brokers first enter into contracts for purchase/sale of securities and thereafter, follow it up with delivery of shares, accompanied by transfer deeds duly signed by the registered holders. The seller is entitled to receive the consideration agreed to as on the date of contract. The Board are of the opinion that it is the date of broker’s note that should be treated as the date of transfer in cases of sale transactions of securities provided such transactions are followed up by delivery of shares and also the transfer deeds. Similarly, in respect of the purchasers of the securities, the holding period shall be reckoned from the date of the broker’s note for purchase on behalf of the investors. In case the transactions take place directly between the parties and not through stock exchanges the date of contract of sale as declared by the parties shall be treated as the date of transfer provided it is followed up by actual delivery of shares and the transfer deeds.
3. As regards the second issue, where securities are acquired in several lots at different points of time, the First-in-first-out (FIFO) method shall be adopted to reckon the period of the holding of the security, in cases where the dates of purchase and sale could not be correlated through specific numbers of the scrips. In other words, the assets acquired last will be taken to be remaining with the assessee while assets acquired first will be treated as sold. Indexation, wherever applicable, for long-term assets will be regulated on the basis of the holding period determined in this manner.
Circular: No. 704, dated 28-4-1995.
This has been confirmed via ITAT rulings as well -
Also, you don’t need to manually calculate this as Console does this automatically -
Hey @Vij,
As per the CBDT Circulars, period of holding shall be determined from the date of purchase and not from the date of demat. Additionally, date of purchase/sale is apparently be taken from the broker’s contract note.
Here, you read the below article for more insights about holding period calculation under capital gain:
I hope, it helps! 
