Help / Tax
Long-term gains on shares bought before February 2018
How the 31 January 2018 price sets your cost, with a worked example.
Long-term gains on listed shares and equity mutual funds became taxable from 1 April 2018. To avoid taxing gains made before that, the law sets a special cost for shares bought before 1 February 2018. This is often called grandfathering.
The rule
For a share bought before 1 February 2018 and sold as long term, the cost used for tax is the higher of:
- what you actually paid, and
- the lower of its price on 31 January 2018 and the price you sold it at.
The second part means the rule can raise your cost up to the 31 January 2018 price, but never create a loss you didn't really make.
Three examples
You bought a share in 2015 for ₹100. Its closing price on 31 January 2018 was ₹250.
| Sold at | Lower of 250 and sale | Cost for tax | Gain |
|---|---|---|---|
| ₹400 | ₹250 | ₹250 | ₹150 |
| ₹200 | ₹200 | ₹200 | ₹0 |
| ₹80 | ₹80 | ₹100 | −₹20 |
In the first row, the real gain is ₹300, but only the ₹150 made after January 2018 is taxed.
How Wealth Plus applies it
- Every sale is matched to purchases first in, first out, in each demat account.
- For a lot bought before 1 February 2018 and sold more than 12 months later, the 31 January 2018 price is looked up and the rule above is applied.
- Bonus shares count from the bonus date; after a split, the original purchase date is kept.
- The capital gains report in ITR format shows the 31 January 2018 value per lot, as Schedule 112A asks.
Tax rates and exemption limits change with each budget. Wealth Plus works out the gain; your CA applies the rate for the year. This guide is general information, not tax advice.