Grandfathering rule for LTCG on listed equity

Sat, 16 May 2026 00:00:00 +0000

The grandfathering rule for long-term capital gains (LTCG) is the transitional tax provision in the Indian Income Tax Act, 1961, that protects equity investors from being taxed on gains that accrued before 1 February 2018, the date on which Section 112A reintroduced LTCG on listed equity after a 14-year exemption. Under the rule, the cost of acquisition for computing LTCG on listed equity shares and equity-oriented mutual fund units acquired on or before 31 January 2018 is deemed to be the higher of the actual purchase price and the fair market value (FMV) on 31 January 2018, subject to a cap that the deemed cost cannot exceed the actual sale price. The mechanism has the effect of treating all pre-1-February-2018 appreciation as outside the taxable base, while gains that accrue after that date are taxed under Section 112A.

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.

Section 55(2)(ac) on WebNotes

Grandfathering rule for LTCG on listed equity

Grandfathering of LTCG on equity MFs (31 January 2018)