Archive · 24 Sep 2026
Inherited 1980s Shares: Grandfathering Rules Limit 2026 LTCG Tax
If you inherit shares from your father, the tax office usually looks at what your father paid for them.
Special rules protect some older listed shares bought before February 1, 2018.
These rules use the higher of the old purchase price and the shares’ value on January 31, 2018.
The value can be based on the highest quoted exchange price that day.
You can still use this protection even if you inherited the shares after 2018.
For equity mutual funds, the closing value on January 31, 2018, is used instead.
When you sell, you do not get an inflation adjustment called indexation.
The tax rate is 12.5% on qualifying long-term gains above the total yearly exemption of ₹1.25 lakh.
Inherited shares generally retain the original owner’s acquisition cost for tax purposes.
For assets acquired before April 1, 2001, fair market value on that date may generally be substituted, subject to tax rules.
Eligible listed shares acquired before February 1, 2018 use the higher of actual cost and January 31, 2018 fair market value, under grandfathering rules.
Inheritance after January 31, 2018 does not by itself remove grandfathering if the original owner acquired the securities before the cutoff.
LTCG is taxed at 12.5% on aggregate gains above ₹1.25 lakh, with no indexation benefit for these listed shares or equity-oriented funds.
- Who
- Heirs who sell inherited listed equity shares or equity-oriented mutual fund units, including securities originally acquired by a parent.
- What
- The article explains how to calculate the cost of inherited securities and apply grandfathering rules for pre-February 1, 2018 acquisitions.
- When
- The shares may be sold in 2026; the relevant grandfathering valuation date is January 31, 2018.
- Where
- For listed shares, the relevant value is based on a recognised stock exchange; the article does not specify a location.
- Why
- To determine taxable long-term capital gains while applying the applicable grandfathering provisions.
- Grandfathering cutoff
- The original owner must generally have acquired eligible shares or units before February 1, 2018.
- Listed-share valuation date
- January 31, 2018.
- Listed-share fair market value
- The highest quoted price on a recognised stock exchange on January 31, 2018, where prescribed conditions are met.
- Mutual-fund valuation
- The closing net asset value on January 31, 2018, applies to eligible equity-oriented mutual fund units.
- Tax rate
- 12.5% on qualifying long-term capital gains above the applicable exemption.
- Annual exemption
- ₹1.25 lakh in aggregate long-term capital gains from covered listed shares and equity-oriented schemes.
- Indexation
- Not available for these listed equity shares and equity-oriented mutual fund units.