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 31st January, 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 1st April 2018. In each of these scenarios, a certain stock or equity mutual fund scheme is purchased on 1st January 2017 and sold on 1st 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 31st January 2018 (FMV)  and Sale Price (SP):

ScenarioScenario DescriptionPurchase 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 CalculationLong Term Capital Gain
1PP < FMV < SP10020025020050
2PP < SP < FMV1002001501500
3FMV < PP < SP1005015010050
4SP < PP < FMV10020050100-50
5SP < FMV < PP1005025100-75
6FMV < SP < PP1005075100-25
7Bonus: PP = 0, FMV < SP020025020050
8Bonus: PP = 0, SP < FMV

Click here to download the FAQ list published by CBDT.

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