🚨 Dividend received. Capital loss booked. Tax benefit too? 🤔 Not always. Section 94(7) of the Income-tax Act prevents a tax-saving strategy called Dividend Stripping. Here's a simple example👇 1️⃣ Ravi buys shares of XYZ Ltd. for ₹1,00,000 just before the dividend record date. 2️⃣ He receives a ₹8,000 dividend. 3️⃣ After the stock goes ex-dividend, the price falls. Ravi sells his shares for ₹90,000. 📊 Result: • Dividend received: ₹8,000 • Capital Loss: ₹10,000 Many think they can: ✅ Enjoy the ₹8,000 dividend ✅ Claim the full ₹10,000 capital loss ❌ That's where Section 94(7) steps in. The Income-tax Act disallows the capital loss to the extent of the dividend received. So: 👉 Capital Loss = ₹10,000 👉 Dividend = ₹8,000 ✅ Allowable Capital Loss = ₹2,000 only The remaining ₹8,000 loss cannot be claimed. 🎯 Why? To prevent investors from buying shares only to collect the dividend and then creating an artificial tax loss. Remember the conditions: 📌 Buy within 3 months before the record date. 📌 Sell within 3 months after the record date (shares) or within 9 months (mutual fund units). 📚 Tax planning is legal. 🚫 Artificial tax loss creation isn't. Follow 20K Microcap Investing for practical tax concepts explained with real-life examples. #IncomeTax #TaxPlanning #Dividend #CapitalGains #CA #Finance #Investing #StockMarketIndia #Taxation #Section94 #PersonalFinance