First In, First Out
The convention that the earliest-acquired units of a security are treated as sold first.
How it is identified
Test: on a partial sale, the cost and holding period of the oldest lot are used first, then the next oldest
Unit
qualitative
In depth
FIFO is applied by depositories and fund registrars and is the basis on which Indian capital gains are computed, which means an investor cannot choose which lot to sell for tax purposes. The consequence matters: selling part of a holding accumulated over years disposes of the oldest and usually lowest-cost lot, producing a larger gain but qualifying as long-term. For SIP investments each instalment is a separate lot with its own purchase date, so a redemption may draw on lots with different holding periods and different tax treatment. Exit loads are applied on the same basis, which is why only part of a redemption may attract one.
Worked example
300 shares bought at ₹100 in January and 300 at ₹180 in November; selling 300 disposes of the January lot. The gain is computed against ₹100 and qualifies as long-term, regardless of which shares the seller had in mind.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “First In, First Out” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.