Tax loss harvesting ( for capital gain Tax on stocks )

Hello everyone it's important to  save when you have earned big 

Tax loss harvesting is a tax-saving measure where taxpayers can reap benefit from underperforming stocks

long-term capital gains are subject to tax, here I am with a huge tax burden this year.

You might have some ‘dud’ stocks in your portfolio and these stocks can possibly never get back to the price at which you bought, let alone make money for you. Now is the time to use such loss-making stocks. So this year, when you’ve incurred capital gains, especially long-term capital gains, it will be a good idea to get rid of these dud scripts and utilise the capital loss to reduce the tax liability. This way of reaping benefit from underperforming stocks is called tax loss harvesting.

when investors are able to estimate that even in the next assessment year, their capital gains may be high, it’s a common practice to buy back or repurchase the shares sold. This way you are creating a buffer for loss harvesting. Essentially, it implies that the same shares are brought back at around the sale price and gets added back to the portfolio

Let’s assume that for the current assessment year, I have long-term capital gain of ₹1.75 lakh short-term capital gain of ₹ 1.25 lakh and a short-term capital loss of ₹50,000. So, the tax liability would work out to ₹26,250. That is without using the capital loss. Here’s the computation: [(1,75,000-1,00,000) *10%+(1,25,000*15%)] = ₹26,250

But if I utilise the capital loss, the tax burden reduces to ₹18,750. [(1,75,000-1,00,000) *10%+((1,25,000-50,000) *15%] = ₹18,750.

remember some basics of the set-off rules in capital gains. Long-term capital loss can be set off only against long-term capital gain. But short-term capital loss can be set off against short-term capital gain or long-term capital gain. Remember I told you about buying back the stock you’ve sold? People do it with the assumption that the stock will continue to be a loss-making one, which will give an opportunity to set off against capital gains in the subsequent year(s).

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