Tax Loss Harvesting Calculator
Optimize your tax liability by offsetting realized gains with portfolio losses before the financial year ends.
What is Tax Loss Harvesting?
Tax loss harvesting is the strategy of selling securities at a loss to offset a capital gains tax liability. This strategy is typically used to limit the recognition of short-term capital gains, which are taxed at a higher rate (20% as of Budget 2024) compared to long-term gains.
Income Tax Rules for Set-off in India
- Short Term Capital Loss (STCL): Can be set off against both STCG and LTCG.
- Long Term Capital Loss (LTCL): Can only be set off against Long Term Capital Gains (LTCG).
- Carry Forward: If you cannot set off the entire loss in the current year, you can carry it forward for up to 8 assessment years.
How it Works
If you have realized a profit of ₹1,00,000 this year, your tax (STCG) would be ₹20,000. If you have another stock in your portfolio that is currently at a loss of ₹40,000, you can sell it to "realize" that loss. Your net taxable gain becomes ₹60,000, and your tax reduces to ₹12,000—saving you ₹8,000 instantly.
Important: Wash Sale and Re-entry
While India doesn't have a formal "Wash Sale" rule like the US, it is advisable to wait for a few days before buying back the same stock to avoid your transaction being flagged as a "colorable device" for tax evasion.
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