➖Selling a security/stocks that has incurred a loss to help investors reduce or offset taxes on any capital gains income subject to taxation.

The sold security can be bought back or replaced by a similar one (Intraday square off not valid)

📝 Kindly Note

LTCG Loss: will be adjusted against long-term Gain only

STCG LOSS: can be set off against both long-term Gain and short-term capital Gain (First priority short term Capital Gain)

Example:

1) If an individual earns ₹5 lakh in Short-Term Capital Gains (STCG) this year, they must pay 20% of this amount as taxes, which amounts to ₹1,00,000.

2) Additionally, if the individual holds stocks with an unrealized loss of ₹3,00,000, they can sell these stocks to reduce their net STCG to ₹40,000.

This would require paying 20% of ₹2,00,000, which amounts to ₹40,000 in taxes, resulting in a tax savings of ₹60,000.

3) This process of selling stocks to harvest losses and save on taxes is known as tax-loss harvesting.

4) Any – Unbooked long term capital gain of upto Rs 1,25,000/- can be booked to save tax

Generally do this at the closing hours of the trading session & re-initiate the position next trading day morning…

This process will help to reduce the tax outgo now…