31 March 2016
Dividend stripping refers to the practice of using dividends declared by a scheme to lower one's tax liability. Investors essentially pocket the dividend and show reduction in the net asset value (NAV) as capital loss to be adjusted against capital gains from any other investment.
“Dividend stripping is a quick way of shoring up assets. It is also a way of favouring select corproates and high net worth individuals, who can use it as a tax-saving tool,” said a fund official on condition of anonymity.
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