Now Reading: Grandfathering rules shield inherited 1980s shares from high 2026 tax
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Grandfathering rules shield inherited 1980s shares from high 2026 tax
If you inherited listed shares bought by a parent in the 1980s and sell them in 2026, grandfathering provisions can still determine your tax cost, even if the inheritance occurred after the…
If you inherited listed shares bought by a parent in the 1980s and sell them in 2026, grandfathering provisions can still determine your tax cost, even if the inheritance occurred after the key cut-off date. The cost of acquisition is taken as the higher of the original cost and the fair market value as on January 31, 2018.
For listed equity shares, the fair market value is based on the highest quoted price on that date. Indexation is not available, long-term capital gains on these shares are taxed at a flat 12.5% on gains exceeding Rs 1.25 lakh in a financial year. Converting physical certificates into demat form does not affect the acquisition history.
Indian Opinion Analysis
The key to this provision is the original owner's acquisition date, not the inheritance date. The Income Tax Act treats the heir as stepping into the shoes of the previous owner, which is why the February 1, 2018, cut-off still applies even if the shares were transferred years later. Taxpayers who inherit such shares should retrieve the original purchase contract or broker note from the 1980s to establish the cost base. Without documentary proof, the assessing officer may reject the grandfathering benefit and apply the fair market value as on April 1, 2001, under the general rule. The next likely flashpoint is any amendment in the Union Budget, which could alter the 12.5% rate or the Rs 1.25 lakh exemption threshold for long-term capital gains.
Source: livemint.com
This brief was synthesised by AI from the source linked above.
