Tax Loss Harvesting for Stock Traders

What is Tax Loss Harvesting? Selling underperforming stocks to offset gains and lower tax liability. How does it Work? Unrealized losses are realized by selling shares before year-end. Realized losses are then used to offset other profits.

Example Illustration Selling specific shares to realize a loss of INR 1,27,500. Offset against profits, reducing tax liability effectively. Taxation on Trading Income Capital gains taxed at 10% for equity shares, 15% for short-term gains. Non-speculative business income taxed at slab rates.

Applicability of Tax Loss Harvesting Suitable for equity delivery and mutual fund trading. Not applicable to intraday, F&O, commodity, or currency trading. Rules for Set-Off Long-term capital losses offset long-term gains. Short-term capital losses offset both short-term and long-term gains.

Considerations for Traders Analyze potential income streams before converting losses. Salary income cannot be offset by non-speculative business losses alone. Conclusion Tax loss harvesting offers traders a strategic approach to optimize their tax situation and manage investment portfolios effectively.