Grandfathering rules explained to compute capital gains for stocks and equity mutual funds

Modified on Mon, 14 Aug 2023 at 11:00 AM

As per the Grandfathering rule, all gains until 31st January, 2018 will be grandfathered. This implies that you will not be taxed on any gains that you have already accumulated up until 31^stJanuary, 2018.

MProfit has consistently been the preferred choice of solution amongst chartered accountants and investors for the computation of short-term and long-term capital gains.

MProfit supports the auto-calculation of capital gains as per the grandfathering rules for stocks and equity mutual funds. Investors would not need to manually compute the capital gains as per the complex computation explained below. The capital gains are auto computed once your upload your transactions and apply auto-corporate actions for your stocks.

The example below detail how long-term capital gains will be calculated for sales on or after 1^st April 2018. In each of these scenarios, a certain stock or equity mutual fund scheme is purchased on 1^st January 2017 and sold on 1^st April 2018. The Long Term Capital Gain calculation for this asset is now computed by determining what the Cost of Acquisition is for the asset, by comparing the values for Purchase Price (PP), Fair Market Value on 31^st January 2018 (FMV) and Sale Price (SP):

Scenario	Scenario Description	Purchase Price as on 01-Jan-2017 (PP)	Fair Market Value as on 31-Jan-2018 (FMV)	Sale Price as on 01-Apr-2018 (SP)	Cost Price for Capital Gains Calculation	Long Term Capital Gain
1	PP < FMV < SP	100	200	250	200	50
2	PP < SP < FMV	100	200	150	150	0
3	FMV < PP < SP	100	50	150	100	50
4	SP < PP < FMV	100	200	50	100	-50
5	SP < FMV < PP	100	50	25	100	-75
6	FMV < SP < PP	100	50	75	100	-25
7	Bonus: PP = 0, FMV < SP	0	200	250	200	50
8	Bonus: PP = 0, SP < FMV	0	200	150	150	0

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