Tax Harvesting in India
Save Part of Capital Gains Tax
Most investors overpay taxes without knowing this simple trick.
Tax harvesting is a 100% legal way to reduce your tax bill and optimize profits.
A must-know strategy for every Indian investor! 🧵👇
🔥 What is Tax Harvesting?
A tax-saving technique where you sell loss-making investments to offset capital gains tax.
It allows you to turn losses into tax savings and carry them forward for future gains.
💡 Smart investors do this every year to legally reduce taxes!
🧾 Capital Gains Tax in India:
📊 Short-Term Capital Gains (STCG):
• Applies to stocks/mutual funds held < 1 year
• Tax: 20% on profits
📈 Long-Term Capital Gains (LTCG):
• Applies to stocks/mutual funds held > 1 year
• Tax: 12.5% on gains above ₹1.25 lakh per FY (No indexation)
💡 If you don’t use tax harvesting, you’re leaving money on the table!
🚀 How Does Tax Harvesting Work?
Step 1️⃣: Identify Loss-Making Investments
Scan your portfolio for stocks or mutual funds trading below your purchase price.
Step 2️⃣: Sell & Book the Loss
Sell these assets before 31st March to realize the loss and reduce taxable gains.
Step 3️⃣: Offset Capital Gains
➤ Use these losses to offset your STCG first (higher 20% tax).
➤ Remaining losses offset LTCG above ₹1.25 lakh.
Step 4️⃣: Carry Forward Excess Losses
If losses exceed gains, carry them forward for up to 8 years to offset future profits.
Step 5️⃣: Reinvest Wisely
Buy a similar but not identical stock/fund to maintain your investment exposure while complying with tax laws.
🔹 Simple, effective, and 100% legal.
💰 Why Every Investor Should Use Tax Harvesting:
✅ Save Lakhs in Taxes
✅ Clean Up Your Portfolio – Remove underperformers & free up capital.
✅ Offset Gains for 8 Years – Losses don’t go to waste!
✅ Plan Around the ₹1.25 Lakh LTCG Exemption
✅ Boost Net Returns – Reduce tax drag on your investments.
📅 Pro Tips for Maximizing Tax Harvesting:
1. Do It Before 31st March – Only losses booked before the FY-end count.
2. Use LTCG Exemption Smartly – Sell stocks with gains up to ₹1.25 lakh yearly (Tax-free).
3. Avoid Wash Sale Mistakes – Don’t repurchase the same stock immediately. Use similar but different stocks.
4. File ITR Properly – If you don’t file your capital loss in ITR, you can’t claim carry-forward benefits.
5. Plan Smartly with Mutual Funds – You can switch funds within the same category for better performance while harvesting losses.
📊 Example: Tax Harvesting in Action
👨💼 Investor Scenario:
🔹 ₹15 lakh STCG from stock sales (Tax @20% = ₹3 lakh)
🔹 ₹5 lakh loss from underperforming stocks
Without Tax Harvesting:
Total tax = ₹3 lakh
With Tax Harvesting:
Taxable Gain: ₹15L - ₹5L = ₹10L
New Tax = ₹2 lakh
💰 Tax Saved: ₹1 lakh instantly!
And if the ₹5 lakh loss exceeds this year’s gains?
Carry it forward for up to 8 years and reduce future taxes!
🔥 Advanced Tax Harvesting Strategy (Pro-Level)
💎 Use the LTCG Exemption Hack
Since LTCG under ₹1.25 lakh is tax-free, here’s how experts use it:
✅ Sell stocks with gains up to ₹1.25 lakh every year (no tax).
✅ Reinvest immediately in the same stock to reset your purchase price (cost basis).
This reduces your future taxable gains—an optimized tax-saving compounding strategy! 🚀
🚫 Mistakes That Can Cost You Money:
⚠️ 1. Buying Back Too Soon (Wash Sale Mistake):
• If you buy the same stock too soon, you may lose the tax benefit.
• Instead, buy similar but different stocks/funds.
⚠️ 2. Forgetting to File Losses in ITR:
• If you don’t report the loss, you can’t carry it forward for future gains.
⚠️ 3. Ignoring LTCG Exemption:
• Many investors forget the ₹1.25 lakh LTCG tax-free limit—Use it every year!
⚠️ 4. Last-Minute Rush:
• Tax harvesting should be planned before 31st March, not at the last minute.
🚀 Take Action Today & Save on Taxes:
✅ Review Your Portfolio – Identify tax-loss harvesting opportunities.
✅ Sell Loss-Making Investments – Before FY-end to offset gains.
✅ Reinvest Wisely – Don’t break compliance rules.
✅ File ITR Properly – To carry forward unused losses.
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