Hi,
I have a question regarding section 94(7) when applied to mutual funds.
First to recap 94(7) for mutual funds :
"With effect from April 1, 2005, capital loss arising on sale of units, which are bought within 3 months prior to the record date (date fixed by the fund for the purposes of entitlement of the unitholder to receive the income) and sold within 9 months after the record date, shall be ignored to the extent of exempt income received or receivable on such units during the said period. "
https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2004ITAct/section94.htm
Now lets consider a scenario for Liquid Mutual Fund with Monthly Dividend. For the sake of clarity, lets assume
- NAV on 1st of every month is Rs. 10.00
- NAV on end of month is Rs. 11.00
- Dividend of Re. 1.00 is paid out at the end of every month so that NAV falls to 10.00 on the first of the next month.
Now lets consider a hypothetical buy/sell timeline.
- On March 30, 2011, I bought 100 units at NAV of 10.99 for total of INR 1099.
- On March 31, 2011, I got dividend of Rs 1 * 100 = Rs 100.
- Every end of subsequent months I got dividend of Rs 100.
- On August 2, 2012, I sold 100 units at NAV of 10.01 for total of INR 1001
Now, here is the scenario :
- I got a dividend (actually 3 dividends) from the date of purchase till 3 months from the date of purchase.
- I sold my units within 9 months of receiving the last dividend.
- However, there is NOT a single dividend which meets BOTH of the clauses of purchase before 3 months of record date and sell within 9 months of record date.
So in this case can I claim a Capital Gains loss of INR (1099 - 1001) = INR 98.
I am not sure if both or any of the clases need to apply.
What do you all think ?