This is legitimate Tax Planning and you must consult your CA before undertaking any action as rules may change.
Investor buys 1000 Share of Stock A for ₹ 100. Now Bonus is declared at 1:1. So now investor hold 2000 shares. However, the price will get adjusted to ₹50.
Now the investor holds original 1000 shares bought at cost price of ₹100 and 1000 bonus shares at ₹0 cost.
On selling these original shares within 1 year of buying, investor will generate a short term capital loss of ₹50,000 (1000 shares x (₹100 cost price - ₹50 sell price))
This STCL of ₹50,000 can then be used as a set-off against any LTCG an investor may have.
This isn't Tax Evasion. But there is a twist👇
Investor needs to hold the original 1000 shares at-least 3 months prior to record date OR sell the original shares atleast 9 months after the record date to claim this STCL benefit (Section 94(8) inverted in Budget 2022).
Above is also known as Bonus Stripping.
Investor buys 1000 Share of Stock A for ₹ 100. Now Bonus is declared at 1:1. So now investor hold 2000 shares. However, the price will get adjusted to ₹50.
Now the investor holds original 1000 shares bought at cost price of ₹100 and 1000 bonus shares at ₹0 cost.
On selling these original shares within 1 year of buying, investor will generate a short term capital loss of ₹50,000 (1000 shares x (₹100 cost price - ₹50 sell price))
This STCL of ₹50,000 can then be used as a set-off against any LTCG an investor may have.
This isn't Tax Evasion. But there is a twist👇
Investor needs to hold the original 1000 shares at-least 3 months prior to record date OR sell the original shares atleast 9 months after the record date to claim this STCL benefit (Section 94(8) inverted in Budget 2022).
Above is also known as Bonus Stripping.
