Suppose we purchase 4000 Mutual Funds units  @ 10 each on 10 June i.e. Rs 40000

We are allotted 1000 Bonus Mutual Funds Units on 14 June

So now we have 5000 Mutual funds units at a cost of 40000 (Rs 8 per Mutual Fund)

What is tax treatment if

We sell on 17 June  Whole 5000 Mutual funds Units @ Rs 8,

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We sell on 17 June Only  4000 Mutual funds @ Rs 8,

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We sell on 17 June Only  4400 Mutual funds Units @ Rs 8,

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What is the record date in above cases

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Section 94(8)

If a person purchases units of Mutual Fund  within 3 months before record date

And earns bonus unit on it

And sells such original units (whether whole or in part) within 9 months of such date

While continuing to hold all or any of the bonus units

Then loss on sale of such units shall be ignored

This Loss ignored will be cost of purchase of additional units

Note: - If bonus unit also sold then this section not applicable.

This Section is only applicable in case of Mutual Fund Units and not Shares




Mr A Purchased 10000 Mutual Fund units of 10 each i.e. for Rs 100,000 on 1 Jan.

On 31 Jan, He received 5000 Mutual fund units as bonus

He sold 11000 existing units for Rs 9 each on 12 Feb. while continuing to hold 4000 bonus shares

Is it a bonus stripping transaction?

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What is the treatment on Sale made on 12 Feb of existing units

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Suppose Balance 4000 Bonus Shares were * 9 each were sold on  25 Feb

What is the taxable treatment 

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Suppose whole 15000 shares were sold together @ 9 each

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.