What Is FMV for Capital Gains Before 2018?
For qualifying long-term capital assets acquired before 1 February 2018 and covered by section 112A, the fair market value as of 31 January 2018 can form part of the prescribed cost calculation.
Quick Answer
FMV as of 31 January 2018 is one input in the grandfathering formula for qualifying section 112A assets acquired before 1 February 2018. It is not automatically the taxable cost for every old investment.
When Is 31 January 2018 FMV Relevant?
The date is relevant to the grandfathering mechanism for qualifying assets covered by section 112A that were acquired before 1 February 2018.
How Does the FMV Interact With Actual Cost?
The statutory formula uses the higher of actual cost and the prescribed comparison value, subject to the rule that the resulting deemed cost cannot exceed the sale consideration.
Why the Listed Price May Not Be Enough
The applicable fair market value can depend on the nature of the security and the prescribed valuation rule. Use the value required by the tax provisions rather than an arbitrary historical price.
What Records Should I Keep?
Keep broker or fund statements showing the original acquisition, historical valuation information and the sale details.
Schedule 112A
The ITR's Schedule 112A contains fields for acquisition cost, fair market value and sale value used in the section 112A computation.
Important
The grandfathering calculation is technical and applies only where the statutory conditions are satisfied.
Frequently Asked Questions
Can I use the highest price on 31 January 2018?
Use the fair-market-value rule prescribed for the relevant security. Do not substitute an arbitrary price.
Does FMV replace the original purchase cost?
Not automatically. FMV is one component of the statutory grandfathering formula.
Where is the calculation reported?
Qualifying section 112A transactions are reported through the relevant capital-gains and Schedule 112A fields in the ITR.
Related EZTax Resources
- What Is Capital Gain in Income Tax?
- What Is Short-Term and Long-Term Capital Gain?
- How to Calculate Capital Gain From Shares?
- How to Report Capital Loss in ITR?
- Which ITR Form Should I Use for Capital Gains?
- Does AIS Show Capital Gains?
- Capital Gains Income Tax Guide
Official Sources
For current capital-gains and ITR guidance, refer to the Income Tax Department resources for the relevant assessment year.
Income Tax Department — ITR-2 FAQ
Income Tax Department — Set-off / Carry-forward of Losses FAQ
