When ex-Finance Minister Arun Jaitley reintroduced the long-term capital gains tax on equities and equity-oriented mutual funds, he added that it came with grandfathering clause.

A grandfather clause is a provision to any new rule, which allows the old rule to continue to apply to the existing situation or the situation that was approved before the new rule was implemented. This means that after a new rule comes in to place, it will be applicable only to future cases and not the case prior the new rule coming in to effect.

In this context, the grandfathering clause meant that LTCG made till January 31, 2018, have been grandfathered, so the gains made prior to January 31, 2018, will remain tax-exempt.