Mutual Funds & Bonus Issue

A mutual fund that I have invested in has issued bonus units. What are the tax implications of this? From the tax point of view, bonus units are conceptually similar to dividend stripping, but somewhat more complex. Bonus units that a fund issue is deemed to have been acquired at zero cost. Thus, whenever they are sold, the entire sale price is treated as capital gains. However, at the time of issue of bonus, the NAV of the fund drops in a proportion that is ident

This article was originally published on March 15, 2003.