How to compute LTCG on PPFCF with grandfathering

From WebNotes, a public knowledge base. Last updated 17 May 2026. Reading time ~8 min. Level: Intermediate.

Key facts

Applicable section	Section 112A of the Income Tax Act, 1961, for equity-oriented mutual fund schemes held over 12 months
Tax rate	12.5 per cent above Rs 1.25 lakh annual exemption per FY (post Finance Act 2024, effective 23 July 2024)
Grandfathered cost	For units acquired on or before 31 January 2018: cost = max(actual cost, FMV on 31 Jan 2018), subject to actual sale price
Unit allocation	FIFO (First-In-First-Out) per SEBI and Income Tax framework

This guide covers computing Section 112A long-term capital gains on Parag Parikh Flexi Cap Fund (PPFCF) redemptions, with particular emphasis on the grandfathering provision for units acquired on or before 31 January 2018. PPFCF’s launch date (24 May 2013, then named PPLTVF, later renamed PPLTEF and PPFCF) means many long-tenure unit holders have substantial pre-31-Jan-2018 holdings that benefit from the grandfathered-cost provision under the Finance Act 2018. The PPFAS Capital Gains Statement generated by SelfInvest applies these provisions automatically; this guide walks through the manual computation for verification and for cases where independent calculation is needed.

Prerequisites

An understanding of Section 112A: long-term capital gains (over 12 months holding) on listed equity and equity-oriented mutual fund schemes (which includes PPFCF as a flexi-cap equity scheme).
The PPFAS Capital Gains Statement for the relevant FY (covers FIFO and applies grandfathering automatically); see how to download a PPFAS capital-gains statement for ITR.
For manual computation: the PPFAS account statement showing all PPFCF acquisitions and the FMV (Net Asset Value) of PPFCF on 31 January 2018.
Awareness of the post-Finance-Act-2024 framework:
- 12.5 per cent LTCG rate (up from 10 per cent under the pre-July-2024 framework).
- Rs 1.25 lakh annual exemption (up from Rs 1 lakh).
- Effective 23 July 2024 for FY 2024-25 (so the first six months of FY 2024-25 used the prior framework; the second six months use the new framework).
- Full Rs 1.25 lakh exemption and 12.5 per cent rate apply for FY 2025-26 onwards.
Awareness that PPFCF’s NAV on 31 January 2018 (or the next-trading-day NAV if 31 Jan 2018 was a non-business day; in 2018, 31 January was a Wednesday) is the grandfathered FMV.
For FY 2024-25 redemptions across the 23 July 2024 cut-off, separate computations for pre-and-post cut-off redemptions are required.

Step-by-step procedure

Step 1: Identify the redemption event and units

From the PPFAS account statement or the SelfInvest dashboard, identify the redemption:

Redemption date.
Total units redeemed (or switched out; switches are tax events).
Redemption NAV.
Total sale value (units multiplied by NAV).
Exit load applicable (computed separately on the gross redemption value).

The capital-gains computation uses the net sale value (gross sale value minus exit load, where exit load reduces the proceeds; the Income Tax framework permits this).

Step 2: Identify the source FIFO lots

The Income Tax framework requires FIFO (First-In-First-Out) unit allocation for redemption computation. From the account statement, trace the redeemed units back to their original purchase lots in chronological order. Each lot has:

Acquisition date.
Acquisition NAV.
Units in the lot.
Actual cost (acquisition NAV multiplied by units).

Example: an investor’s PPFCF folio with three FIFO lots:

Lot A: 100 units acquired 15 June 2014 at NAV Rs 14.50.
Lot B: 200 units acquired 20 December 2017 at NAV Rs 22.00.
Lot C: 300 units acquired 10 March 2024 at NAV Rs 65.00.

Redemption: 400 units on 5 February 2026 at NAV Rs 80.00.

FIFO order: Lot A (100 units) + Lot B (200 units) + 100 units from Lot C.

Step 3: For pre-31-Jan-2018 lots, look up the grandfathered NAV

PPFCF’s NAV on 31 January 2018 is the grandfathered FMV for any units in lots acquired on or before that date. The PPFAS scheme name at the time was Parag Parikh Long Term Equity Fund (PPLTEF, after the 16 February 2018 rename was just upcoming on 31 Jan 2018; for grandfathering purposes the NAV used is the PPLTEF NAV on 31 Jan 2018 in its predecessor name PPLTVF, since the rename happened later).

Lookup sources:

AMFI 31 January 2018 grandfathered NAV table: Published by AMFI immediately after Finance Act 2018 came into effect.
PPFAS scheme history page: The AMC’s historical NAV records.

For PPFCF (then PPLTVF), the 31 January 2018 NAV was approximately Rs 22.00 (reference; verify against the AMFI table for exact figure).

Step 4: Compute the cost basis per lot

For each FIFO lot redeemed:

Lot acquired on or before 31 January 2018: Apply the grandfathering rule. Cost basis = max(actual cost, grandfathered NAV per unit times units in the lot). Subject to actual sale price.
- Formal Section 112A formula: Cost = min(Sale price, max(Actual cost, FMV on 31 Jan 2018)).
- The “subject to actual sale price” rule prevents grandfathering from increasing the cost above the sale price (i.e., no loss can be artificially created via grandfathering).
Lot acquired after 31 January 2018: Cost basis = actual cost. No grandfathering applies.

For the worked example:

Lot A (100 units, 15 June 2014): Pre-31-Jan-2018.
- Actual cost = 100 x 14.50 = 1,450.
- Grandfathered cost = 100 x 22.00 = 2,200.
- Sale price for Lot A units = 100 x 80 = 8,000.
- Cost basis = min(8,000, max(1,450, 2,200)) = 2,200.
Lot B (200 units, 20 December 2017): Pre-31-Jan-2018.
- Actual cost = 200 x 22.00 = 4,400.
- Grandfathered cost = 200 x 22.00 = 4,400.
- Sale price for Lot B units = 200 x 80 = 16,000.
- Cost basis = min(16,000, max(4,400, 4,400)) = 4,400. (Grandfathering does not help here because actual cost equals grandfathered cost.)
100 units from Lot C (10 March 2024): Post-31-Jan-2018.
- Cost basis = 100 x 65 = 6,500.

Step 5: Compute the gain per lot

For each lot:

Lot A: Sale value 8,000 - Cost 2,200 = LTCG 5,800.
Lot B: Sale value 16,000 - Cost 4,400 = LTCG 11,600.
Lot C (100 units): Sale value 8,000 - Cost 6,500 = LTCG 1,500. (Holding period from 10 March 2024 to 5 February 2026 is 23 months, well over 12 months, so LTCG.)

Total LTCG across all three lots = 5,800 + 11,600 + 1,500 = 18,900.

Step 6: Aggregate across lots

The redemption yields total LTCG of Rs 18,900 from the three FIFO lots.

Step 7: Apply holding-period test for LTCG vs STCG

Each lot’s holding period determines whether the gain is LTCG (over 12 months) or STCG (under 12 months):

Lot A held from 15 June 2014 to 5 February 2026: 11 years and 8 months. LTCG.
Lot B held from 20 December 2017 to 5 February 2026: 8 years and 2 months. LTCG.
Lot C portion held from 10 March 2024 to 5 February 2026: 1 year and 11 months. LTCG.

All three are LTCG.

Step 8: Apply the Rs 1.25 lakh annual exemption to LTCG

The Rs 1.25 lakh annual exemption applies to the aggregate of all equity-oriented mutual fund LTCG and listed-equity LTCG across the FY (not per scheme or per AMC). If the investor’s total equity LTCG across all sources in FY 2025-26 is Rs 18,900, this is well below Rs 1.25 lakh, and no tax is payable on this redemption.

If the investor has additional LTCG events bringing the FY total above Rs 1.25 lakh, the excess is taxed at 12.5 per cent. For example:

Total FY 2025-26 LTCG across all sources = Rs 3,18,900 (this redemption plus other Rs 3 lakh).
Exemption = Rs 1,25,000.
Taxable LTCG = Rs 1,93,900.
LTCG tax = 12.5% x 1,93,900 = Rs 24,237.50.

What can go wrong

Wrong grandfathered NAV used: The grandfathered FMV is specifically the NAV on 31 January 2018, not on a nearby date. PPFCF’s NAV may have moved Rs 0.20-0.40 in the days around 31 January; using the wrong date can produce an incorrect cost basis.
Grandfathering applied to post-31-Jan-2018 lots: Grandfathering applies only to units acquired on or before 31 January 2018. Subsequent purchases use actual cost.
SIP installments before and after 31 Jan 2018: A long-tenure SIP investor will have some installments pre-31-Jan-2018 (eligible for grandfathering) and some post (not eligible). Each installment is a separate FIFO lot and is treated separately.
PPLTVF/PPLTEF/PPFCF rename history: PPFCF was previously PPLTEF (from 16 Feb 2018) and PPLTVF (from 24 May 2013). For grandfathering purposes, the scheme is the same legal entity; the 31 Jan 2018 NAV (in PPLTVF’s name at that point) is the grandfathered FMV.
Sale price below grandfathered cost: If the sale price is below the grandfathered FMV (i.e., the NAV fell from Rs 22.00 in Jan 2018 to below Rs 22.00 at sale), the grandfathering formula uses the sale price as the upper bound for cost basis. This prevents artificial loss creation.
Switch leg taxation: Switches are redemption events. The PPFCF-to-Liquid switch from a long-held PPFCF folio triggers the full grandfathered-LTCG computation on the redemption leg.
Pre-23-July-2024 vs post-23-July-2024 rates in FY 2024-25: Redemptions before 23 July 2024 used 10 per cent rate and Rs 1 lakh exemption. Redemptions on or after 23 July 2024 used 12.5 per cent and Rs 1.25 lakh. The ITR-2 for FY 2024-25 captures both at appropriate Schedule 112A rows.
STT applicability: STT (Securities Transaction Tax) is payable on the redemption leg. The Section 112A exemption requires that STT has been paid; for direct-AMC redemptions, the AMC pays STT and the investor is deemed to have met the STT requirement.
Manual computation versus PPFAS-statement variance: The PPFAS-issued capital-gains statement applies the rules automatically. Significant variance between manual and PPFAS-statement computation indicates either an error in the manual work or an unusual circumstance worth investigating with PPFAS customer service.
PPFCF unit price post-bonus or split history: PPFCF has not undergone a stock-split-type unit-price reset in its history (PPFCF NAV grew organically). For other AMC schemes with bonus units or splits, additional adjustments would be needed.

Worked example walkthrough

An investor has invested in PPFCF since the launch:

24 May 2013 (launch): 1,000 units at Rs 10 (acquisition cost: Rs 10,000).
1 April 2017: 500 units at Rs 18 (acquisition cost: Rs 9,000).
31 January 2018: PPFCF NAV = Rs 22 (this is the grandfathered FMV).
1 April 2019: 300 units at Rs 25 (acquisition cost: Rs 7,500).
1 April 2024: 200 units at Rs 65 (acquisition cost: Rs 13,000).
5 February 2026: redeems 1,500 units at NAV Rs 80 (sale value: Rs 1,20,000).

FIFO sequence for the 1,500 units:

All 1,000 units from 2013 lot (pre-31-Jan-2018).
- Actual cost = 1,000 x 10 = Rs 10,000.
- Grandfathered cost = 1,000 x 22 = Rs 22,000.
- Sale value = 1,000 x 80 = Rs 80,000.
- Cost basis = min(80,000, max(10,000, 22,000)) = Rs 22,000.
- LTCG = 80,000 - 22,000 = Rs 58,000.
All 500 units from 2017 lot (pre-31-Jan-2018).
- Actual cost = 500 x 18 = Rs 9,000.
- Grandfathered cost = 500 x 22 = Rs 11,000.
- Sale value = 500 x 80 = Rs 40,000.
- Cost basis = min(40,000, max(9,000, 11,000)) = Rs 11,000.
- LTCG = 40,000 - 11,000 = Rs 29,000.
Total LTCG on this redemption = Rs 58,000 + Rs 29,000 = Rs 87,000.

If the investor has no other equity LTCG in FY 2025-26, the full Rs 87,000 is below the Rs 1.25 lakh exemption, so no tax is payable.

Without grandfathering (a hypothetical), the LTCG would have been:

(1,000 x 80 - 1,000 x 10) + (500 x 80 - 500 x 18) = 70,000 + 31,000 = Rs 1,01,000 LTCG.
Net of Rs 1.25 lakh exemption: still below exemption, no tax.

But for larger pre-2018 lots, grandfathering can save material tax.

How to download a PPFAS capital-gains statement for ITR covers the SelfInvest-issued statement that applies grandfathering automatically
How to compute STCG on PPFAS equity schemes covers Section 111A STCG
How to file Schedule 112A in ITR for PPFAS LTCG covers the ITR-2 entries
How to redeem PPFAS units via SelfInvest covers the redemption mechanics
The reference article on LTCG on equity mutual fund (Section 112A) covers the broader framework
The reference article on equity MF grandfathering January 2018 covers the grandfathering provision

External references

References

Income Tax Act, 1961, Section 112A and its provisos.
Finance Act, 2018 (introduction of Section 112A and grandfathered-cost provision).
Finance Act, 2024 (LTCG rate at 12.5%, Rs 1.25 lakh exemption, effective 23 July 2024).
AMFI 31 January 2018 grandfathered NAV table for equity-oriented mutual fund schemes.
CBDT Circular No. 19/2018 (clarifications on Section 112A computation).
PPFAS Mutual Fund, Parag Parikh Flexi Cap Fund Scheme Information Document.
PPFAS Mutual Fund historical NAV records.
SEBI Master Circular for Mutual Funds, 22 May 2024.
CAMS Investor Services capital-gains-statement methodology.
PPFAS investor desk FAQ at amc.ppfas.com/faqs/.

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WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 17 May 2026
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