When the Government of India introduced Section 112A in the Union Budget 2018, it reinstated the taxation of Long-Term Capital Gains (LTCG) on listed equity shares and equity mutual funds after a fourteen-year tax-free hiatus. However, to prevent unfair retrospective taxation on long-term wealth creators, Parliament embedded a landmark protection: the Grandfathering Clause under Section 55(2)(ac) of the Income Tax Act, 1961. Under this provision, all capital gains accrued up to 31 January 2018 are completely tax-exempt. If you are researching “share price on 31 January 2018”, “how to find 31 Jan 2018 stock price for LTCG tax”, or seeking the exact step-by-step mathematical formula to calculate your taxable capital gains for ITR filing, this comprehensive tax masterclass provides verified statutory guidance.
At SharePriceHub, our financial and tax education dossiers are verified against official Central Board of Direct Taxes (CBDT) circulars, the Finance Act, and historical Bhavcopy records from the National Stock Exchange of India (NSE) and BSE Limited. In this authoritative guide, we break down the 3-step grandfathering formula, explain the updated Budget 2024 tax rules (₹1.25 Lakh exemption threshold and 12.5% tax rate), provide six step-by-step mathematical case studies (including bonus, split, and loss scenarios), demonstrate how to download official exchange Bhavcopies, and guide you through Schedule 112A reporting in ITR-2 and ITR-3.
1. Quick Summary: Section 112A & 31 January 2018 Grandfathering Rules
Before reviewing detailed case studies and ITR schedule navigation, review the core legal parameters governing equity grandfathering under the Income Tax Act:
| Taxation / Legal Parameter | Current Statutory Benchmark | Legal Reference & Taxpayer Significance |
|---|---|---|
| Governing Tax Section | Section 112A & Section 55(2)(ac) | Income Tax Act, 1961 (Introduced via Finance Act, 2018) |
| Cut-Off Benchmark Date | 31 January 2018 | Gains accrued prior to this date are 100% grandfathered (tax-free) |
| Current LTCG Tax Rate | 12.5% without indexation | Revised in Union Budget 2024 (previously 10% from 2018 to July 2024) |
| Annual Exemption Limit | ₹1,25,000 per financial year | Enhanced from ₹1,00,000 in Budget 2024; applies across all listed LTCG gains |
| Applicable Holding Period | More than 12 months | Listed equity shares and units of equity-oriented mutual funds |
| Fair Market Value (FMV) Definition | Highest Traded Price on 31 Jan 2018 | Highest quote recorded on NSE or BSE during official market hours |
| Securities Transaction Tax (STT) | Mandatory Requirement | STT must have been paid at purchase (post-2004) and sale of equity shares |
| ITR Reporting Schedule | Schedule 112A (ITR-2 or ITR-3) | Mandatory scrip-wise reporting required for grandfathered equity assets |
2. Table of Contents: Complete Tax Guide Navigation
- 1. Quick Summary: Section 112A & 31 January 2018 Grandfathering Rules
- 2. Table of Contents: Complete Tax Guide Navigation
- 3. Statutory Background: Why 31 January 2018 Matters Under Indian Tax Law
- 4. The Official 3-Step Grandfathering Mathematical Formula
- 5. Visual Decision Flowchart: How to Determine Deemed Cost of Acquisition
- 6. Six Practical Case Studies: From Multibagger Gains to Capital Loss Offsets
- 7. Adjusting 31 Jan 2018 Prices for Bonus Shares, Stock Splits & Demergers
- 8. Step-by-Step Guide: How to Download Official 31 Jan 2018 Bhavcopy from NSE & BSE
- 9. Special Rules: Equity Mutual Funds, ULIPs & Unlisted Shares Listed Later
- 10. Union Budget 2024 Amendments: ₹1.25 Lakh Exemption & 12.5% Tax Rate
- 11. ITR Filing Guide: How to Fill Schedule 112A in ITR-2 and ITR-3
- 12. Common Taxpayer Mistakes & How to Avoid Income Tax Notices
- 13. Frequently Asked Questions (FAQ) – 31 January 2018 Share Price
- 14. Important Statutory Disclaimers & Regulatory Notices
3. Statutory Background: Why 31 January 2018 Matters Under Indian Tax Law
Between 2004 and 2018, long-term capital gains on listed securities in India were 100% tax-exempt under Section 10(38) of the Income Tax Act, provided Securities Transaction Tax (STT) was paid. This regime encouraged millions of domestic citizens and foreign institutional investors to participate in Indian public equity markets.
When Finance Minister Arun Jaitley presented the Union Budget on 1 February 2018, the Government decided to reintroduce LTCG tax to eliminate perceived tax arbitrage between financial assets and other productive investments. However, imposing a 10% tax on gains accumulated over 10 or 20 years of patient investing would constitute an unfair retrospective levy. To maintain sovereign policy credibility, the Government grandfathered all gains accrued up to 31 January 2018. This means an investor who bought Infosys in 2000, Reliance in 2005, or HDFC Bank in 2010 pays zero tax on the entire compounding gains achieved between their purchase date and 31 January 2018!
4. The Official 3-Step Grandfathering Mathematical Formula
Section 55(2)(ac) defines the exact method to compute the Cost of Acquisition (COA) for listed equity assets acquired before 1 February 2018. The calculation follows a strict three-step sequential algorithm:
| Sequential Step | Mathematical Operation | Legal Meaning & Objective |
|---|---|---|
| Step 1 | Find Fair Market Value (FMV) on 31 January 2018 | The highest recorded traded price on a recognized exchange (NSE or BSE) on 31.01.2018. |
| Step 2 | Calculate Value A = Lower of (FMV on 31 Jan 2018, Actual Sale Price) | Caps the grandfathered benchmark to the actual sale realization, preventing artificial tax losses. |
| Step 3 | Calculate Deemed COA = Higher of (Actual Purchase Price, Value A) | Protects historical principal capital while establishing the grandfathered cost floor. |
| Final Gain / Loss | Taxable LTCG = Actual Sale Price – Deemed COA – Transfer Expenses | Only the net gain exceeding the deemed COA is subject to Section 112A taxation. |
Crucial Rule on Indexation: Under Section 112A, the benefit of Cost Inflation Index (CII) indexation is strictly not available for listed equities. The grandfathering mechanism serves as the statutory replacement for indexation.
5. Visual Decision Flowchart: How to Determine Deemed Cost of Acquisition
To eliminate ambiguity when analyzing individual stock holdings, inspect the visual decision architecture illustrating how Section 55(2)(ac) calculates the deemed acquisition cost:
6. Six Practical Case Studies: From Multibagger Gains to Capital Loss Offsets
To master the mathematical application across every conceivable investment outcome, study these six exhaustive scenarios:
| Scenario | Actual Cost (₹) | FMV on 31.01.18 (₹) | Sale Price (₹) | Step 2 (Lower) | Deemed COA | Net Taxable Capital Gain / (Loss) |
|---|---|---|---|---|---|---|
| Case 1: Multibagger Blue-Chip | ₹100.00 | ₹500.00 | ₹1,200.00 | ₹500.00 | ₹500.00 | +₹700.00 Gain (Entire ₹400 gain up to 2018 is tax-free) |
| Case 2: Sale Below 2018 FMV | ₹100.00 | ₹500.00 | ₹350.00 | ₹350.00 | ₹350.00 | ₹0.00 (Nil) (No gain taxable, no artificial loss allowed) |
| Case 3: Genuine Capital Loss | ₹600.00 | ₹400.00 | ₹300.00 | ₹300.00 | ₹600.00 | (-₹300.00 Loss) (Actual loss available for set-off/carry-forward) |
| Case 4: Rebound After 2018 Dip | ₹400.00 | ₹300.00 | ₹600.00 | ₹300.00 | ₹400.00 | +₹200.00 Gain (Taxed only on gain above actual cost of ₹400) |
| Case 5: Flat Performance | ₹250.00 | ₹250.00 | ₹250.00 | ₹250.00 | ₹250.00 | ₹0.00 (Nil) (Zero tax liability) |
| Case 6: Post-2018 Stock Acquisition | ₹500.00 | N/A | ₹900.00 | N/A | ₹500.00 | +₹400.00 Gain (Grandfathering does not apply post-01.02.2018) |
Crucial Insight on Case 2 (The Zero-Tax Sweet Spot): In Case 2, an investor bought at ₹100, saw the stock rise to ₹500 on 31 January 2018, and later sold at ₹350. Even though the investor made an actual profit of ₹250 per share (₹350 – ₹100), the taxable capital gain is mathematically ZERO! The law does not tax profits made before 31 January 2018, nor does it penalize the investor for selling below the peak 2018 FMV.
7. Adjusting 31 Jan 2018 Prices for Bonus Shares, Stock Splits & Demergers
One of the most complex challenges taxpayers face when filing Schedule 112A is handling corporate actions that occurred between 1 February 2018 and the date of sale. You cannot simply use the raw 2018 Bhavcopy price without adjusting for splits or bonus distributions:
| Corporate Action | Adjustment Mechanics for 31.01.2018 FMV | Practical Example & Calculation |
|---|---|---|
| Stock Split (e.g. 1:10 Split) | Divide the 31.01.2018 FMV by the split factor. | If raw 2018 FMV was ₹2,000 and face value split from ₹10 to ₹1 (10 shares for 1), adjusted FMV = ₹200.00 per share. |
| Bonus Issue (e.g. 1:1 Bonus) | Divide the 31.01.2018 FMV by the total post-bonus share ratio. | If an investor held 100 shares at ₹1,000 FMV on 31.01.18, and received 1:1 bonus in 2021 (total 200 shares), adjusted FMV = ₹500.00 per share. |
| Corporate Demerger | Allocate 31.01.2018 FMV based on the official net book value apportionment ratio. | When Reliance demerged Jio Financial Services (apportionment ratio ~91.82% RIL / 8.18% JFSL), the 2018 FMV is split accordingly. |
| Bonus Shares Issued Before 01.02.2018 | Actual acquisition cost is zero, but FMV as of 31.01.2018 is fully grandfathered. | Bonus shares received in 2015 have Cost = ₹0, but Deemed COA = 31.01.2018 FMV! Entire gains up to 2018 are tax-free. |
8. Step-by-Step Guide: How to Download Official 31 Jan 2018 Bhavcopy from NSE & BSE
To protect yourself against income tax scrutiny notices or mismatches in the Annual Information Statement (AIS), always preserve the official exchange Bhavcopy of 31 January 2018 as documentary proof. Follow these official steps:
- Downloading from National Stock Exchange (NSE):
- Navigate to the official NSE India website (
nseindia.com) under the “Market Data” > “Historical Reports” section. - Select “Capital Market” and choose date 31-Jan-2018.
- Download the file named
cm31JAN2018bhav.csv.zip. - Open the CSV spreadsheet, search for your stock ticker symbol, and locate the “HIGH” column. This represents the official Fair Market Value (FMV).
- Navigate to the official NSE India website (
- Downloading from Bombay Stock Exchange (BSE):
- Visit the BSE India website (
bseindia.com) under the “Markets” > “Market Activity” > “Bhavcopy” portal. - Select Equity segment and set the calendar date to 31/01/2018.
- Download the Bhavcopy file
EQ310118.CSV. - Search by the 6-digit BSE Scrip Code, and record the value under the “HIGH” price column.
- Visit the BSE India website (
- Which Exchange Takes Precedence? If a stock is actively traded on both NSE and BSE, you are legally entitled to adopt the exchange that recorded the higher of the two prices on 31 January 2018, as this legally maximizes your grandfathered cost base!
9. Special Rules: Equity Mutual Funds, ULIPs & Unlisted Shares Listed Later
The grandfathering rules extend beyond direct listed equities to include equity-oriented mutual fund units and pre-IPO unlisted shares under specific provisions:
| Asset Classification | Method to Determine 31.01.2018 Fair Market Value | Statutory Reference & Guidelines |
|---|---|---|
| Equity-Oriented Mutual Funds | The official Net Asset Value (NAV) published by the AMC on 31 January 2018. | Section 55(2)(ac)(ii); check the historical NAV database on the AMFI India portal. |
| Unlisted Shares on 31.01.2018 (Listed Later) | Adjusted using Cost Inflation Index (CII) from year of purchase up to FY 2017-18 (CII: 272). | CBDT Notification No. 71/2018; formula: Cost * (272 / CII of acquisition year). |
| Shares Traded Infrequently (No Trade on 31.01.18) | The highest traded price on the immediately preceding trading day. | If stock did not trade on 31 Jan, check 30 Jan, 29 Jan, etc., back to the latest traded date. |
10. Union Budget 2024 Amendments: ₹1.25 Lakh Exemption & 12.5% Tax Rate
The Union Budget 2024 enacted two structural modifications to Section 112A that every equity investor must incorporate into their tax calculations:
- Exemption Ceiling Raised to ₹1,25,000: The annual basic exemption threshold for aggregate Long-Term Capital Gains under Section 112A was increased from ₹1,00,000 to ₹1,25,000 per financial year. Investors can systematically harvest up to ₹1.25 Lakh of long-term gains every fiscal year completely tax-free.
- Tax Rate Harmonization to 12.5%: For all transfers executed on or after 23 July 2024, the applicable LTCG tax rate is 12.5% (plus applicable surcharge and 4% Health & Education Cess). Long-term gains realized prior to 23 July 2024 remain taxed at the earlier 10% rate.
- Grandfathering Remains 100% Intact: Crucially, the 31 January 2018 grandfathering formula under Section 55(2)(ac) was completely preserved and remains in full legal effect.
11. ITR Filing Guide: How to Fill Schedule 112A in ITR-2 and ITR-3
When preparing your annual Income Tax Return (ITR-2 for salaried investors or ITR-3 for business/professional traders), reporting grandfathered equity sales requires scrip-by-scrip entry in Schedule 112A. Follow this exact workflow:
| Schedule 112A Column | Required Data Input | Filing Tip & Verification Check |
|---|---|---|
| Column 1 & 2: ISIN & Scrip Name | International Securities Identification Number (e.g. INE002A01018 for RIL) | Must match the exact ISIN in your demat transaction statement or CAS. |
| Column 3: Number of Units / Shares | Total quantity of shares sold during the relevant financial year | Account for stock splits or bonus shares issued after 2018. |
| Column 4: Sale Price per Unit | Gross sale realization per share | Do not subtract STT, brokerage, or exchange turnover fees here. |
| Column 5: Total Sale Consideration | Calculated automatically (Column 3 * Column 4) | Matches gross transaction value on broker contract note. |
| Column 6: Cost of Acquisition | Actual historical purchase price per share | Historical cash paid per share when originally acquired before 2018. |
| Column 7: FMV per Unit on 31.01.2018 | Highest recorded traded price on 31 January 2018 (split-adjusted) | Obtained from official NSE/BSE Bhavcopy. |
| Column 8: Lower of Col 4 & Col 7 | Calculated automatically by the tax portal software | Represents “Value A” in Section 55(2)(ac). |
| Column 9: Higher of Col 6 & Col 8 | Calculated automatically by the tax portal software | Represents your final Deemed Cost of Acquisition. |
| Column 10: Transfer Expenses | Brokerage, GST, exchange charges, stamp duty (Excluding STT!) | Important: STT is legally non-deductible under Section 112A. |
| Column 11: Net Capital Gain / Loss | Computed automatically (Col 5 – Col 9 – Col 10) | Aggregated across all scrips toward the ₹1.25 Lakh exemption threshold. |
12. Common Taxpayer Mistakes & How to Avoid Income Tax Notices
Filing capital gains without meticulous attention to detail frequently triggers automated defect notices under Section 139(9) or verification queries under Section 143(1). Avoid these four critical errors:
- Deducting STT as an Expense: Under Indian tax law, Securities Transaction Tax (STT) cannot be claimed as an expenditure in connection with transfer. Deduct only brokerage, clearing charges, exchange turnover fees, and stamp duty.
- Using Closing Price Instead of Day’s High: Section 55(2)(ac) explicitly mandates using the highest traded price on 31 January 2018, not the closing price. Using the closing price needlessly lowers your cost base and forces you to pay excess tax!
- Failing to Adjust for Stock Splits: If you held a stock that underwent a 1:5 stock split in 2022, inputting the unadjusted 2018 Bhavcopy price will cause an artificial mismatch with the number of sold shares, triggering a scrutiny notice.
- Ignoring Capital Losses: Many investors fail to report loss-making legacy holdings. As proved in Case 3, genuine capital losses below actual cost can be set off against taxable gains in other stocks or carried forward for up to 8 assessment years!
13. Frequently Asked Questions (FAQ) – 31 January 2018 Share Price
Why is 31 January 2018 used as the benchmark date for LTCG tax?
The Union Budget 2018 reintroduced LTCG tax on 1 February 2018. To prevent retrospective taxation, the Government grandfathered all gains accrued up to 31 January 2018, ensuring past gains remain 100% tax-free under Section 55(2)(ac).
Should I use the 31 January 2018 Closing Price or the Highest Price?
Under Section 55(2)(ac) of the Income Tax Act, you must use the highest traded price recorded on the exchange on 31 January 2018, not the closing price.
What if the stock did not trade on 31 January 2018?
If there was no trading in the stock on 31 January 2018, the law permits you to use the highest traded price on the immediately preceding trading day on which the stock traded on a recognized exchange.
Can I pick between NSE and BSE for the 31 January 2018 price?
Yes. If the share is listed on both NSE and BSE, you are legally entitled to adopt the exchange that recorded the higher of the two highest prices on 31 January 2018, as this legally maximizes your cost base.
What is the current LTCG tax rate and exemption limit under Section 112A?
Following Union Budget 2024, LTCG on listed equity shares is taxed at 12.5% without indexation for transfers executed on or after 23 July 2024. The basic annual exemption ceiling is ₹1,25,000 per financial year.
How do I handle bonus shares received after 31 January 2018?
For bonus shares issued after 31 January 2018, you must adjust the 31 January 2018 FMV proportionally across the post-bonus share count, or treat the bonus shares as acquired at zero cost depending on the exact corporate allotment structure.
How do I treat bonus shares received BEFORE 31 January 2018?
For bonus shares received prior to 1 February 2018, the actual purchase cost is ₹0, but the deemed cost of acquisition is the full Fair Market Value as of 31 January 2018, making all historical gains completely tax-free!
Can grandfathering create an artificial capital loss?
No. Step 2 of the grandfathering formula specifies taking the “Lower of FMV on 31.01.2018 and Actual Sale Price”. This mathematical condition prevents taxpayers from claiming an artificial capital loss if the stock drops below its 2018 peak.
Can I claim a genuine capital loss on shares bought before 2018?
Yes. If you sell a stock below your actual historical purchase cost, Step 3 ensures your actual purchase cost becomes your deemed COA, allowing you to claim a genuine long-term capital loss to set off against other capital gains.
Does grandfathering apply to unlisted shares that listed later?
Yes. Under CBDT Notification No. 71/2018, unlisted shares acquired before 1 February 2018 that listed subsequently calculate their deemed cost by adjusting the acquisition cost with the Cost Inflation Index (CII: 272 for FY 2017-18).
What is the FMV benchmark for Equity Mutual Funds?
For equity-oriented mutual funds, the Fair Market Value as of 31 January 2018 is the official Net Asset Value (NAV) declared by the respective Asset Management Company (AMC) on that date.
Is Securities Transaction Tax (STT) deductible as a transfer expense?
No. The Income Tax Act explicitly prohibits the deduction of STT against capital gains. You can only deduct brokerage charges, stamp duty, exchange turnover fees, and GST.
Which ITR form should I use to report grandfathered equity gains?
Salaried and non-business individuals must use ITR-2, while individuals with business or professional income must file ITR-3. Both forms contain the mandatory Schedule 112A.
What happens if I fail to fill Schedule 112A in my ITR?
Failing to fill Schedule 112A for grandfathered shares can result in the automated tax processing center (CPC) calculating your gains from original acquisition cost, leading to massive tax demands and potential defect notices under Section 139(9).
How long can I carry forward unabsorbed long-term capital losses?
Under Section 74 of the Income Tax Act, unabsorbed long-term capital losses can be carried forward for up to 8 assessment years to be set off against future taxable long-term capital gains.
14. Important Statutory Disclaimers & Regulatory Notices
Educational and Informational Notice: This research dossier is published exclusively for financial education, taxpayer awareness, and capital market research. SharePriceHub is an independent financial education portal and is not affiliated with, sponsored by, or associated with the Income Tax Department of India, the Central Board of Direct Taxes (CBDT), SEBI, NSE, or BSE.
No Professional Chartered Accountancy or Tax Advisory Advice: The tax calculations, statutory interpretations, and scenarios presented in this report represent general financial educational illustrations under the Income Tax Act, 1961 and Finance Act amendments. Taxation rules may vary depending on individual residential status, corporate structures, and assessment years. Taxpayers must consult a qualified Chartered Accountant (CA) or tax professional before filing statutory returns.
Regulatory Compliance & Sourcing: Statutory provisions, grandfathering formulas, and Bhavcopy retrieval procedures are compiled from official publications of the Central Board of Direct Taxes (CBDT), the Income Tax Act, 1961, and official records of the National Stock Exchange of India (NSE) and BSE Limited.
