Tax Loss
Harvesting

Tax loss harvesting is the strategy of selling investments at a loss to offset taxable capital gains, reducing your overall tax liability. You then immediately rebuy the same (or equivalent) investment to maintain market exposure. In India, unlike the US, there is no 'wash sale' rule preventing this.

Yes. Short-term capital loss can be set off against both STCG and LTCG. Long-term capital loss can only be set off against LTCG — not against STCG or any other income. Unabsorbed losses can be carried forward for 8 assessment years.

Every year, if your equity holdings have unrealised LTCG of ₹1.25L or more, sell and rebuy to 'harvest' those gains tax-free. This resets your cost basis to the current price. Over 10–15 years, this strategy can save lakhs in future LTCG tax.

No. India does not have a wash sale rule. You can sell a mutual fund or stock at a loss and immediately buy the same or equivalent security on the same day without any restriction. This makes tax harvesting much simpler and more powerful in India than in the US.

Yes. Unabsorbed capital losses can be carried forward for 8 assessment years. However, losses can only be carried forward if you file your ITR by the due date (July 31 or extended date). File on time even if income is below taxable limit to preserve loss carry-forward benefits.

For portfolios below ₹10–15L, the tax saved may be small. For larger portfolios (₹50L+) with significant capital gains exposure, annual tax harvesting can save ₹25,000–₹2L per year. The strategy is most powerful for HNIs with real estate gains or large equity portfolios.