BONUS STRIPPING

bonus stripping is done in order to avoid tax evasion plans of investors who buy the units within 3 months before the record date and sell it  AT LOSS within 9 months of the record date of bonus units.....on the record date they receive bonus units....we know the cost of bonus units will be taken as nil...but u/s94(8) ...........whatever loss we incurred at sale of these bonus units will become the cost of these bonus units...

the loss arising on account of sale will not be taken into account fr the calculation of tax liability of the individual...in case he has some more units of the same left with him..the loss so arising on sale of other units will be the cost of purchase of the remaining units...u/s 94(8)

regards,

Sneha Bagla