FMV on WebNotes

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.

How to compute LTCG with grandfathering on Zerodha

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

When the Finance Act 2018 reintroduced long-term capital gains tax on listed equity and equity-oriented mutual funds under section 112A, it included a grandfathering rule to protect gains accrued before the provision came into force. Under this rule, the cost of acquisition for equity held on 31 January 2018 is deemed to be the Fair Market Value (FMV) on that date if the actual cost is lower, but only to the extent of the sale consideration. This ensures that gains accrued up to 31 January 2018 are not taxed under section 112A.

Grandfathering rule for LTCG

Mon, 11 May 2026 00:00:00 +0000

The grandfathering rule for long-term capital gains (LTCG) is a transitional provision in Section 112A of the Income Tax Act 1961 that protects equity investors from being taxed on gains that accrued before 1 February 2018. Under the rule, the cost of acquisition for computing LTCG on listed equity shares and equity-oriented mutual funds acquired before 31 January 2018 is deemed to be the higher of the actual purchase price and the fair market value (FMV) of the asset as on 31 January 2018. This has the effect of “grandfathering” all pre-February 2018 appreciation out of the taxable base.