How are gains on mutual fund units bought before 1 February 2018 worked out?

Lesson 20 of 50 for advisers · Capital gains statements at CA time · 4 min read · Reviewed 13 Nov 2026

Quick answer

For equity-oriented fund units bought before 1 Feb 2018, the cost is the higher of the actual cost and the lower of the 31 Jan 2018 NAV and the sale value. So gains made up to 31 Jan 2018 stay untaxed. Units are matched first in, first out. For FY 2025-26, audit-case returns are due by 21 Nov 2026 after CBDT’s extension.

Gains on equity-oriented units bought before 1 Feb 2018 are grandfathered. The cost used is the higher of what was paid and the lower of the 31 Jan 2018 NAV and the sale value.

Units are treated as sold in the order they were bought: first in, first out. A capital gains statement from the registrar lists each sale this way.

For FY 2025-26, CBDT moved the due date for audit cases from 31 Oct to 21 Nov 2026, and the audit report from 30 Sep to 21 Oct 2026.

Key idea: A client with units from before 2018 pays tax only on the gain since 31 Jan 2018, if the units have risen since.

Sources

Try the short quiz on this page to check what stuck.

Common questions

Where is the grandfathering rule now?

Section 90 of the Income-tax Act 2025, which carries over section 55(2)(ac) of the 1961 Act.

What NAV is used for unlisted units?

The NAV on 31 Jan 2018.

Where does the client get the statement?

From the registrars, CAMS and KFintech, for any financial year, sent to the registered email.

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