Tax-Loss Harvesting: Save Before 28th March
With the financial year closing on March 31st, investors have a valuable opportunity to reduce capital gains tax using a strategy called tax-loss harvesting. It involves selling underperforming stocks to realize losses and offset capital gains thereby lowering your net tax liability. This strategy is completely legal, commonly used by savvy investors, and can lead to significant tax savings if executed correctly.
How It Works
– Sell equity shares, mutual funds, or ETFs that have incurred a realized capital loss
– Offset that loss against your short-term or long-term capital gains
– Replace the sold security with a similar, not identical investment to maintain your portfolio
– Avoid intraday or buyback of the same security, which may be disallowed during audits
Example
Suppose you made a ₹1,00,000 short-term capital gain, and you also hold a stock that’s currently at a ₹60,000 unrealized loss.
If you sell that stock before March 28th:
Your net gain = ₹40,000
Tax Saved = ₹60,000 × 15% = ₹12,000
Why Use Tax-Loss Harvesting?
Most investors ignore losses but tax-loss harvesting helps turn those red numbers into tax relief. By rebalancing your portfolio and harvesting losses before the year ends, you gain a double benefit: tax savings today and better positioning for tomorrow.