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Dividend stripping …gone Thursday, March 1, 2001

Budget has indeed taken steps to curb investors from taking advantage of dividend stripping by investing in mutual funds for the short term.
The budget has indeed taken steps to curb investors from taking advantage of dividend stripping by investing in mutual funds for the short term. This was possible under Sec 94. But realizing that this results in "unintended benefit flows to the taxpayer", the government intends to introduce a new Sub-section (7) in the above section. "If a person buys or acquires securities or unit within a period of three months prior to the record date fixed for declaration of dividend or distribution of income and sells or transfers the same within a period of three months after such record date, and the dividend or income received or receivable is exempt, then, the loss, if any, arising from such purchase or sale shall be ignored to the extent such loss does not exceed the amount of such dividend or income, in the computation of the income, chargeable to tax, of such person". The finance ministry was expected to plug this loophole and they have done it.
Source:Indiainfoline.com)

 

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