Street Signs: Govt loses Rs 20,000 cr on dividend stripping, say experts

Dividend stripping is a malaise that both the mutual fund (MF) industry and the tax department have been unable to plug in all these years. According to MF industry experts, the tax department loses in excess of Rs 20,000 crore annually, which can go up to Rs 30,000 crore in a bad year. Several fund houses in the past have been known to use this strategy of declaring dividends to shore up their assets in the short term. “The government can tackle this by making some minor changes in the tax laws,” says an industry official.

Joydeep Ghosh