The change in tax rules for debt funds has been worrying a lot of people. The good news, however, is that if you buy shares now and sell them after the bonus date, the notional loss incurred by you can be adjusted with any gains from debt funds, gold, stocks and even property.
Our Director, Mr Vaibhav Sankla says that selling the original shares as soon as the bonus date is over, will result in a short-term capital loss. This loss can be set off against any other short term or long term capital gain.
Smart investors use this bonus stripping strategy to reduce their tax on capital gains. The loss from the sale of shares can be adjusted against taxable long term or short term capital gains from other investments. You can also adjust short-term gains from debt and equity funds against this loss. If in case the loss cannot be adjusted fully, it can be carried forward for up to eight financial years. The interest earned on fixed deposit and bond, however, is not eligible for this adjustment.
This strategy might prove to be beneficial for investors who are worried about the high tax that they have to pay on their debt fund investments, this year. However, the investors must hold the shares for a year at least or pay tax.
Source : Economic Times