Bonus stripping: Foreign portfolio investors from Mauritius feel the pinch

Mauritius has become an attractive destination for debt investments in India

Foreign portfolio investors (FPIs) who invest from Mauritius into Indian companies that dole out bonus debentures will get impacted by the tax avoidance provisions on bonus stripping.

The FY23 Budget has extended these provisions — applicable only to MFs, so far — to shares and units of REITs, InvITs and AIFs. The move will especially affect large institutio-nal investors who sell original units within nine months after the record date because the loss arising from sale of original units would have to be ignored for the purposes of computing taxable income and cannot be set off against any other capital gain.

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