Grandfathering in capital-gains tax means historical gains accrued before a tax-rate change are protected from the new (usually higher) regime. India has used it twice: (a) 31 Jan 2018 for listed equity LTCG; (b) 23 July 2024 for real estate / gold / unlisted assets under the new 12.5% rate.
Worked INR example
You bought Infosys shares on 1 Jan 2015 at ₹500. Highest price on 31 Jan 2018 (grandfathering date for equity) = ₹1,200. You sell on 10 Feb 2025 at ₹1,800. LTCG cost = max(actual cost ₹500, 31 Jan 2018 price ₹1,200) = ₹1,200. Taxable LTCG per share = ₹600 (not ₹1,300). Tax = ₹600 × 10% (legacy rate) above the ₹1 lakh exemption.
When to use
- Computing LTCG on equity bought before 1 Feb 2018 — always use grandfathered cost
- Choosing between 20% with indexation vs 12.5% without on pre-July-2024 real estate
- Estate planning across the 23 July 2024 cut-off
SEBI / tax caveat
For equity, grandfathered cost = higher of (actual cost, 31 Jan 2018 highest market price). Records of 31 Jan 2018 NAVs are published by AMFI and exchanges. Real-estate grandfathering only applies to non-listed assets acquired before 23 July 2024.
Related terms: Grandfathering Rule (LTCG), Indexation FY 2024-25, LTCG.