Definition
Securities Transaction and Grandfathering of LTCG
Grandfathering protected gains accrued before a cutoff date when long-term capital gains tax on listed equity was reintroduced, taxing only later gains.
When tax on long-term capital gains from listed equity and equity mutual funds was reintroduced after a long exemption, the government grandfathered gains up to a cutoff date. In effect, the cost for tax purposes was stepped up to the price as on that date, so only appreciation after it became taxable.
This avoided retroactively taxing years of accrued gains and softened the transition for investors. The concept is important for anyone computing long-term capital gains on shares held across that reform.
Related terms
- Set-Off and Carry Forward of LossesThese rules let taxpayers adjust losses against income of the same or future years, subject to conditions on the type of loss and how long it can be carried forward.
- Capital Gains Account SchemeThe Capital Gains Account Scheme lets taxpayers park capital gains in a designated bank account to retain tax exemption until they reinvest in a specified asset.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.