Bonus stripping has existed for years, and intelligent investors have taken full advantage of this. To make it clear, this is subject to prevailing tax laws of the country or region.
I am not going to take you through what's bonus stripping, and how you can benefit from the same. There were numerous articles in the newspapers couple of days back explaining it to the lowest possible details. I like the below one:
http://articles.economictimes.indiatimes.com/2014-10-28/news/55521336_1_capital-gains-tax-bonus-shares-infosys-shares
This explains why the prices usually start rising on exchanges when a company declares a bonus share, and usually falls when the event is over. Infosys is the good example which rose to 4300 levels from 3500 levels in the span of two months, and now showing signs of weakness.
I think, it's a good strategy to deploy if you have accumulated short terms gains or capital gains from property in the current financial year. I too have used it to lower some short term tax gains as I am okay holding Infosys for another year. It could be risky at times, therefore, be watchful of the company declaring bonus.
Stock splitting is different, you can't have the same advantage as that of bonus stripping. The cost of acquisition also reduced by the same proportion. For example, if you have purchased SBI for 3000/share before the split (split ratio 1:10), your acquisition price after the split will be taken as 300/share to calculate the capital gains. Considering the current price of 319 on 05 Dec 2014, you are actually making a gain of INR 1900 if you have purchased 10 shares before the stock split (Your acquisition price taken as 300/share)
Stay Invested
vA
I am not going to take you through what's bonus stripping, and how you can benefit from the same. There were numerous articles in the newspapers couple of days back explaining it to the lowest possible details. I like the below one:
http://articles.economictimes.indiatimes.com/2014-10-28/news/55521336_1_capital-gains-tax-bonus-shares-infosys-shares
This explains why the prices usually start rising on exchanges when a company declares a bonus share, and usually falls when the event is over. Infosys is the good example which rose to 4300 levels from 3500 levels in the span of two months, and now showing signs of weakness.
I think, it's a good strategy to deploy if you have accumulated short terms gains or capital gains from property in the current financial year. I too have used it to lower some short term tax gains as I am okay holding Infosys for another year. It could be risky at times, therefore, be watchful of the company declaring bonus.
Stock splitting is different, you can't have the same advantage as that of bonus stripping. The cost of acquisition also reduced by the same proportion. For example, if you have purchased SBI for 3000/share before the split (split ratio 1:10), your acquisition price after the split will be taken as 300/share to calculate the capital gains. Considering the current price of 319 on 05 Dec 2014, you are actually making a gain of INR 1900 if you have purchased 10 shares before the stock split (Your acquisition price taken as 300/share)
Stay Invested
vA
No comments:
Post a Comment