I invested in mutual funds and held my investment in one of them for 90 days. I received dividend for this fund and subsequently sold it after 90 days, registering a short-term loss. Can this be used to offset against short-term capital gains made on other investments?
- Chandrasekhar Shivkumar
No, this loss cannot be used to offset the capital gains made against other investments. This strategy is commonly known as 'dividend stripping'. Tax provisions state that where a person buys any units within a period of three months before the record date, sells such units within nine months after such date and the dividend income on such units is exempt from tax, the capital loss on such sale to the extent of the dividend income cannot be set off against other gains.