Holding period refers to the time gap between the purchase and sale of an asset, security or investment. In other words, it is the duration for which the investor holds or owns a particular investment. This is an important factor to consider as it impacts the tax calculations for the investors.

For example, in debt funds holding period of more than 3 years is taken as long-term where indexation benefit is applied. Whereas, for equity mutual funds, holding period of less than 12 months classifies as short-term and attracts Short-Term Capital Gains tax.