Sold shares, MFs after dividend declaration? You might be able to declare losses

Now that fairness dividends are taxable, why ought to a short-term capital loss on sale of these shares or mutual fund schemes be disallowed, if they’re offered instantly after the declaration of dividend?

Name withheld

Answer by Harshad Chetanwala, founder, Mywealthgrowth.com

Your level on permitting short-term capital loss on sale of items or shares instantly after dividend declaration is legitimate because the obtained dividend is now taxable within the fingers of traders. As per part 94(7) of Income Tax Act, there are three clauses that have to be glad to disallow the short-term capital loss in case of sale of items or shares. One of the clauses states the dividend or earnings must be exempted. With impact from 1 April 2020, dividends are taxable within the fingers of the shareholders or unitholders. Hence, this clause of Section 94(7) just isn’t getting glad and short-term capital loss on sale of such shares or mutual fund items ought to be allowed, even when they’re offered instantly after the declaration of dividend.

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