Grandfathering of LTCG on equity MFs (31 January 2018)

Tue, 12 May 2026 00:00:00 +0000

Grandfathering of LTCG on equity mutual funds refers to the statutory mechanism under Section 55(2)(ac) of the Income Tax Act 1961 that protects gains accrued on equity-oriented mutual fund units before 1 February 2018 from being taxed under Section 112A. The provision was inserted by the Finance Act 2018 simultaneously with the reintroduction of LTCG tax on equity after a 14-year hiatus. It operates by deeming the cost of acquisition of pre-2018 units to be the higher of the actual purchase price and the fair market value (FMV) of the units on 31 January 2018, subject to an upper cap of the actual sale price. The effect is that all appreciation up to 31 January 2018 is excluded from the taxable LTCG base.

Deemed Cost on WebNotes

Grandfathering of LTCG on equity MFs (31 January 2018)