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Dividend Stripping - Section 94(7)

 

Suppose Record Date for Dividend / Income - 31.01.2010

 

Acquisition of Shares / Units of MF – Within 3 months prior to the record date (01.11.2009 till 31.01.2010)

 

Sale or Transfer of

·        Shares within 3 months after the record date (01.02.2010 till 30.04.2010)

·        Units of MF within 9 months after the record date (01.02.2010 till 31.10.2010)

 

…………….. in such a case, short term capital loss if any arising on the sale of such shares / MF Units, shall be ignored to the extent of dividend / income received or receivable thereon.

 

Example - (In the case of Shares) -

Particulars

Case I

 

Case II

Case III

 

Case IV

 

Dividend received (31.01.2010)

20000

20000

20000

20000

Sales Consideration

270000 (01.05.2010)

270000 (30.04.2010)

270000 (01.05.2010

270000

(30.04.2010)

Less: Cost of Acquisition

300000 (01.11.2009)

300000 (31.10.2009)

300000 (31.10.2009)

300000 (01.11.2009)

Short Term Cap. Gain / (Loss)

(30000)

(30000)

(30000)

(30000)

Less: Capital Loss to be ignored u/s 94(7)

-

-

-

20000

Short Term Capital Gain / (Loss) for the purpose of computing income chargeable to tax

(30000)

Loss

(30000)

Loss

(30000)

Loss

(10000)

Loss

 

Particulars

Case V

Case VI

 

Case VII

Dividend Received

(31.01.2010)

20000

20000

20000

Sales Consideration

310000 (30.04.2010)

290000 (30.04.2010)

300000 (30.04.2010)

Less: Cost of Acquisition

300000 (01.11.2009)

300000 (01.11.2009)

300000 (01.11.2009)

Short Term Cap. Gain / (Loss)

10000

(10000)

NIL

Less : Capital Loss to be ignored u/s 94(7)

-

10000

-

Short Term Capital Gain / (Loss) for the purposes of computing income chargeable to tax

10000

Gain

NIL

NIL

 


Published by

CA. Rishabh Mittal
(CA in Practice)
Category Income Tax   Report

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