MFs under Sebi scanner on dividend stripping
BY PTI15 Jan 2016 11:45 PM GMT
PTI15 Jan 2016 11:45 PM GMT
Mutual fund houses adopting 'dividend stripping' plan have come under the scanner of capital markets regulator Sebi for possible tax evasion. The dividend stripping typically involves an investor buying a dividend plan of a mutual fund scheme, book a loss on it and then set it off against capital gains from other sources. In a communication to the fund houses on Wednesday, Sebi has asked them to respond by Thursday if they were adopting such technique or not, senior official of an Assets Management Company said.
"The dividend stripping is largely being used for tax arbitrage by investors and mutual fund houses," he added. The Sebi communication has cited a newspaper article which stated that during April 2014 and October 2015, about Rs 25,500 crore was collected in dividend stripping schemes, creating an accounting book loss of over Rs 8,400 crore. Under the current norms, an investor can claim notional loss caused by a dividend payment if the units are purchased three months before the record date or are held for at least nine months after the dividend is paid. In May, industry body Association of Mutual Funds in India (Amfi) had asked fund houses to check the practice ofÂ
'bonus stripping'.
Next Story