I had made investments in some equity oriented mutual funds through SIP route from 2010 to 2015. I have now redeemed these investments in F.Y. 2025-26 for buying a residential property. I am aware that entire capital gain accrued to these investments till 31.1.2018 will not attract any LTCG tax. However, capital gain made thereafter during last 8 years will be subject to LTCG tax. My question is: Do I have to declare in schedule 112A of ITR-2, details of each SIP instalment e.g. buying price & date of buy, grandfathered cost as on 31.1.2018, sell price and date of sale and capital gain etc? Or can I delcare inschedule 112A lumpsum grandfathered (investment) cost as on 31.1.2018, lumpsum selling price/value and resulting capital gains? Total no.of SIP instalments in allmutual funds schemes exceeds 100. Further, can I deduct STT on redemption as expenses on transaction? Secondly, can I claim exemption from LTCG tax on these investments u/s 54F since proceeds were used for buying a residential property. Thanking you Varsha Godbole

Ans: You have raised a very practical question. With SIPs running from 2010 to 2015, there can easily be more than 100 purchase transactions. The grandfathering rule makes the reporting look more complicated than the actual tax position.

» First, a Small Correction on Grandfathering

– Your understanding is broadly right, but technically the appreciation up to 31 January 2018 is not simply removed from the calculation.

– For eligible equity-oriented mutual fund units acquired before 1 February 2018, a special grandfathered cost of acquisition mechanism applies.

– It considers the actual acquisition cost, Fair Market Value as on 31 January 2018 and eventual sale value as prescribed under the tax rules.

– Therefore, you should use the grandfathering calculation for the units rather than simply treating the entire appreciation up to 31 January 2018 as a separate exempt capital gain.

» Do You Need to Report All 100+ SIP Instalments Separately?

This needs a little distinction.

For units acquired on or before 31 January 2018, Schedule 112A requires detailed reporting for applying the grandfathering provisions.

However, this does not necessarily mean that you should blindly create one separate entry for every monthly SIP debit without looking at how the ITR utility and your capital-gain statement group the units.

The current Schedule 112A asks for information such as:

– Whether the units were acquired on or before 31 January 2018.

– ISIN.

– Name of the unit/security.

– Number of units.

– Sale price.

– Sale consideration.

– Original cost.

– Fair Market Value as on 31 January 2018.

– Eligible cost after applying the grandfathering provisions.

– Transfer expenses.

– Resulting LTCG.

Therefore, simply entering one grand total covering all mutual fund schemes, all SIP purchases and all redemptions would not be a good approach.

» Scheme/ISIN-Wise Reporting Is Important

The safer approach is to reconcile the transactions based on the relevant mutual fund units/ISIN and the requirements of Schedule 112A.

Why?

Because different SIP instalments may have:

– Different purchase NAVs.

– Different number of units.

– Different acquisition dates.

– Different original costs.

But the units of a particular scheme/ISIN may have a common 31 January 2018 FMV per unit for grandfathering purposes.

So, instead of manually typing 100+ SIP transactions from old statements, first obtain a proper capital-gains statement from the mutual fund records and reconcile it with the Schedule 112A reporting requirement.

Your CA or tax-return software should be able to handle this much more efficiently than preparing the calculation manually.

» Do Not Enter One Combined Figure for All Mutual Funds

I would avoid entering only:

– Total grandfathered cost of all funds.

– Total redemption value of all funds.

– One combined LTCG number.

Schedule 112A requires identifying information relating to the particular equity share/unit, including ISIN and name.

Therefore, one combined entry for the entire mutual fund portfolio may not provide the information required by the return.

The detailed capital-gain statement should be the starting point.

» FIFO Can Also Become Relevant

With SIP investments, another important point is FIFO – First In, First Out.

When you redeem only part of your mutual fund holding, the units are generally identified on a FIFO basis for capital-gains purposes.

So you should not simply choose whichever SIP instalments produce the lowest capital gain.

The redemption statement/capital-gain report normally works this out.

This becomes particularly important when there were additional investments, switches, redemptions or purchases in the same folio over the years.

» Can STT Paid on Redemption Be Deducted?

No. STT paid on the sale/redemption of eligible equity-oriented mutual fund units is generally not allowed as a deduction while calculating capital gains.

Therefore:

– STT cannot normally be added to your cost of acquisition.

– STT cannot normally be deducted from your sale consideration as a transfer expense for calculating the capital gain.

This is an important difference.

Other expenditure which is legally allowable as expenditure wholly and exclusively connected with the transfer can be considered where applicable. But STT has a specific restriction.

» LTCG Tax Rate for FY 2025-26

For eligible equity-oriented mutual fund units sold during FY 2025-26, Section 112A applies.

– LTCG up to the overall annual threshold of Rs. 1.25 lakh under Section 112A is not taxed.

– LTCG exceeding Rs. 1.25 lakh is generally taxable at 12.5%.

– Applicable surcharge and cess may also apply.

Since your investments were made between 2010 and 2015, the grandfathering provisions can materially reduce the taxable gain compared with simply taking your old SIP purchase cost.

» Can Section 54F Be Claimed on Mutual Fund LTCG?

Potentially, yes.

This is probably the most useful part of your situation.

Section 54F is not restricted only to gains from land or some other physical asset.

It can apply where an individual or HUF earns LTCG from the transfer of a long-term capital asset other than a residential house and fulfils the conditions for investment in a new residential house in India.

Therefore, LTCG arising from eligible long-term equity-oriented mutual fund units can potentially qualify for Section 54F exemption.

» Important: Investing Only the LTCG May Not Give Full Exemption

This is one area where Section 54F is commonly misunderstood.

For full exemption under Section 54F, simply investing an amount equal to your capital gain in the new residential property is not necessarily enough.

The net sale consideration from the original long-term capital asset becomes important.

Broadly:

– If the eligible cost of the new residential house is at least equal to the net consideration from the transferred assets, the entire eligible LTCG may qualify for exemption.

– If the amount invested in the new residential house is lower than the net consideration, the exemption can generally become proportionate.

So please do not assume that investing only the LTCG amount automatically makes the entire LTCG tax-free.

This distinction can make a significant difference to your final tax liability.

» Check Your Existing House Ownership

There is another major Section 54F condition.

On the date when the original asset is transferred, you should not own more than one residential house other than the new residential house, subject to the detailed provisions.

There are also restrictions relating to purchase or construction of another residential house within the specified periods.

So before claiming Section 54F, check your complete residential-property ownership position.

This includes jointly owned properties also. Joint ownership needs to be examined based on the facts rather than simply ignored because your share may be small.

» Timing of the New Residential House

The purchase/construction should also fall within the time limits prescribed under Section 54F.

Broadly, the new residential house in India can be:

– Purchased within one year before the transfer of the original asset.

– Purchased within two years after the transfer.

– Or constructed within three years after the transfer.

If the money had not been utilised before the due date applicable for filing the return, the Capital Gains Account Scheme requirements may also become relevant, depending on your facts and timing.

Since you have already purchased the residential property, check the exact purchase/payment dates against your mutual fund redemption dates.

» Be Careful Because Mutual Fund Redemptions May Be on Different Dates

You have referred to redeeming the investments during FY 2025-26.

If there were several redemptions on different dates, Section 54F timing should be checked carefully.

Do not simply treat the entire FY 2025-26 as though every mutual fund unit was sold on one date.

Keep a proper trail of:

– Redemption dates.

– Redemption amounts.

– Capital gains for each relevant holding.

– New property agreement date.

– Property payment dates.

– Registration details.

– Bank statements showing the movement of funds.

This will make the Section 54F claim much stronger.

» Keep These Records Ready

Considering that your SIPs go back to 2010, good documentation will save a lot of trouble.

Keep:

– Consolidated mutual fund statement.

– Detailed capital-gains statement.

– SIP transaction history.

– ISIN-wise details.

– 31 January 2018 FMV data.

– Redemption statements.

– Bank statements.

– New residential property agreement.

– Payment receipts.

– Stamp duty and registration documents.

– Details of any other residential houses owned by you.

Also reconcile the capital-gain statement with the information appearing in your Annual Information Statement before filing the ITR.

» Final Insights

Your situation has three separate tax issues, and each one needs to be handled correctly.

– For your old SIP investments, use the grandfathering provisions applicable to units acquired before 1 February 2018.

– Avoid reporting one single combined grandfathered cost and sale value for your entire mutual fund portfolio. Schedule 112A requires more granular identifying details. Use a proper capital-gain statement and reconcile the entries with the ITR utility.

– STT paid on redemption cannot normally be claimed as a deduction while calculating the capital gain.

– Section 54F can potentially be claimed against LTCG arising from equity-oriented mutual funds when the conditions are fulfilled.

– Most importantly, for full Section 54F exemption, look at the net consideration requirement and not merely the LTCG amount invested in the house.

Since you have 100+ SIP transactions and are also claiming grandfathering plus Section 54F, I would strongly suggest getting the final Schedule 112A and Section 54F computation checked by a CA before submitting the ITR. A small reporting mistake should not spoil an otherwise valid exemption claim.

Best Regards,

K. Ramalingam, MBA, CFP,

AMFI-Registered MFD – ARN 4188

www.holisticinvestment.in

https://www.linkedin.com/in/ramalingamcfp/