Grandfathering of ELSS and equity MF gains pre 31 January 2018

Mon, 18 May 2026 00:00:00 +0000

The 31 January 2018 grandfathering rule establishes the closing NAV of 31 January 2018 as the deemed cost basis for Long-Term Capital Gains (LTCG) computation on equity mutual fund units (including ELSS) purchased before that date. The rule was introduced as a transition mechanism when the 2018 Union Budget reintroduced LTCG tax on equity assets (which had been tax-free since 2004 under the Section 10(38) exemption).

For investors holding pre-February 2018 equity mutual fund units, the grandfathering rule materially reduces the tax incidence on eventual redemption: only the gain accruing after 31 January 2018 is taxable, not the gain from the original purchase NAV. With the July 2024 Budget further increasing the LTCG rate from 10 per cent to 12.5 per cent under Section 112A , the grandfathering rule’s value has correspondingly increased.

ELSS Grandfathering on WebNotes

Grandfathering of ELSS and equity MF gains pre 31 January 2018