What is Grandfathering?
While presenting the new provisions of long-term capital gains (LTCG), Finance Minister Arun Jaitley said that "I propose to tax such long term capital gains exceeding Rs1 lakh at the rate of 10% without allowing the benefit of any indexation. However, all gains up to 31 January 2018 will be grandfathered.” Who is this grandfather the FM was invoking? 
Well, it is no one’s grandfather but is a clause or a policy in a legislation. A grandfather clause (or policy) is a provision in which an old rule continues to apply to some existing situations while a new rule will apply to all future cases, according to Wikipedia. “Those exempt from the new rule are said to have grandfather rights or acquired rights, or to have been grandfathered in. Frequently, the exemption is limited; it may extend for a set time, or it may be lost under certain circumstances. For example, a ‘grandfathered power plant’ might be exempt from new, more restrictive pollution laws, but the exception may be revoked and the new rules would apply if the plant were expanded.” Often, such a provision is a compromise to allow new rules to be enacted without upsetting a well-established situation.
In this case, the FM imposed a 10% tax on long term capital gains. But, all gains up to 31 January 2018 will not be taxed. It has been grandfathered. Although the new rule would tax LTCG in the future, the current gains on investments done before a certain date are protected from the new tax, even after law is changed to make future gains taxable.
Like many evocative terms like blue-sky law or sunset clause, this concept too originated in the US. In the late 19th century, a number of US Southern states passed legislation and constitutional amendments that imposed a number of new requirements. In some cases these regulations exempted some of those whose ancestors (grandfathers) had the right to vote before the Civil War, from such requirements. The idea was to prevent poor and illiterate African-American former slaves and their descendants from voting, but allow poor and illiterate whites the right to vote. While the term has its origins in such discrimination, today it was used to protect equity holders from the new law.
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    1 year ago


    Rajesh Kapoor

    2 years ago

    Suppose 100 shares of company A were purchased for Rs. 1000 each in 2015 and were quoted at Rs. 5000 a piece on31 Jan 2018.CMP is Rs. 3000. Share B 100 in no. was purchased for Rs.500 in2016. 31.01.18 price 1000 ,CMP3600. shares of both the companies are sold today. What will be tax liability.



    In Reply to Rajesh Kapoor 2 years ago

    1) On shares of company A, your LTCG would be grandfathered fully, so no tax liability.
    (2) On LTCG over and above highest price quoted on 31 Jan 2018, arising out of sale of Company B shares, in this case Rs.2,60,000 would attract 10% tax. Depending on whether you have salary, interest incomes any other incomes which form your taxable incomes and your age etc, which you did not mention, your tax liability may vary and may even be nil.
    Its just my spontaneous opinion. Please note, I am not a tax expert. So, let's see if some tax expert here validates or betters my answer for you to rely on


    2 years ago

    What would be LTCG treatment / tax calc. if :
    (1) stock held from pre-STT era (STT not levied at the time of purchase) is
    (a) sold before 31-01-2018. (b) sold between 01-02-2018 and 31-03-2018. (c) sold after 01-04-2018.
    (2) stock held from post-STT era (STT paid at the time of purchase)
    (a) sold before 31-01-2018. (b) sold between 01-02-2018 and 31-03-2018. (c) sold after 01-04-2018.
    In both cases STT would be paid at time of sale. Will they all get grandfather clause benefit? & what would be the tax payable if any.

    Skandakumar Ganesan

    2 years ago

    Ok. What happens in this case
    A stock was puchased 1st Jan 2017 for 1000 and as on 31st Jan 2018 it closed at 2000.
    Case1 Selling on feb 10 2019 at 2500. Tax to be paid for 500
    If on Feb 10 2019 the stock goes to 1500 can I book loss if 500 because of cut off date or no tax because of 500Rs prifit


    Nanda Patel

    In Reply to Skandakumar Ganesan 2 years ago

    In the second case you cant book loss of 500 cause you investment was @1000 and sale is @ 1500( you made profit of 500.

    All this means is @ 31 jan whatever the closing price was you dont pay tax till that.

    Case 1: [email protected] [email protected] [email protected] lgct 50

    Case 2 [email protected] 100 [email protected] [email protected] lgct:nil tax

    Case 3: [email protected] [email protected] [email protected] Lgct: -10( in this case you will be able to claim loss, as you have taken loss)

    This is my understanding.

    E-way bill must for interstate goods movement from February 1
    The e-way bill, to be generated under the GST for all inter-state movement of goods valued at over Rs 50,000, will become mandatory from Thursday, on the day of the presentation of the Union Budget 2018-19 in Parliament.
    The implementation of this electronic documentation system, to track the movement of goods and designed to prevent tax evasion, was put on hold until after the Goods and Services Tax (GST) stabilised following the rollout of the new indirect tax regime from July 1 last year.
    All states and union territories, except Lakshadweep, have joined the e-way bill system, according to the GST Network (GSTN) officials here, while 13 states have signed up for the intra-state part of the system.
    The e-way bill will also become mandatory for all movement of goods within a state from June 1.
    The officials said that during the 14 day trial period starting from January 17, transporters have generated 28.4 lakh e-way bills, with 3.4 lakh of these being generated on January 30 alone. During this period, 11,581 transporters registered themselves under the system.
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
  • User 

    RNA Corp fails to deposit TDS and EPF resulting in tax demand notices to its former employees
    Mumbai-based RNA Corp has allegedly failed to deposit tax deducted at source (TDS) from salaries of its former employees. This has resulted in its former employees receiving demand notices from the Income Tax Department. In addition, more than 30 employees of Skyline Constructions Company, and AA Associates Pvt Ltd, both units of RNA Corp, have issued recovery notices to the parent company for their outstanding dues. 
    Alleging that the money collected from home-buyers, loan from banks, unpaid salaries, TDS and provident fund (PF) contributions of employees has been used for buying properties in UK and an extravaganza wedding in Paris, right to Information (RTI) activist Sulaiman Bhimani says, “The Enforcement Directorate (ED) should take cognizance of this and impound passport of promoter-directors of RNA Corp and conduct a forensic audit to find out how this money was remitted to Paris and London.” 
    (Anubhav Agarwal, Director, RNA Corp)
    Mr Bhimani has requested Maharashtra Chief Minister Devendra Fadnavis to take action against promoter-director of RNA Corp.
    In addition, CD Chaudhari, Executive Engineer (Estates) at the BrihanMumbai Municipal Corp (BMC) issued a notice to RNA Corp demanding Rs29.02 crore to be paid as capitalized value.  The project, for which this notice is issued, was expected to be completed within three years. In addition, RNA Corp was to pay 90% of the capitalised value to BMC before obtaining occupation certificate and certificate to sale component of the project.
    However, RNA Corp failed to complete the project within scheduled completion date of 17 March 2010. The delay in completion of project was causing revenue losses to BMC and hardship to the tenants residing in the old buildings.
    Moneylife tried contacting Anubhav Agrawal and other executives from RNA Corp, however, there was no response till writing this story. Yogesh Gupta, an associate of RNA Corp, refused to comment.
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