How to save tax on capital gains | Ultimate guide to tax harvesting and tax-loss harvesting

FY24 has been a bumper year for equity investors. Many investors would have also booked some gains. But since capital gains from equity are subject to tax, they will also have to part with some of them. Tax harvesting and tax-loss harvesting can help reduce the tax or even nullify it.

Tax harvesting is also called tax-gain harvesting. It came into being after the introduction of the long-term capital gains tax on equity and the subsequent exemption of gains up to Rs 1 lakh from taxation. In this video, we have explained how you can use it to lower your tax outgo.

Tax-loss harvesting has an even wider scope than tax harvesting. Tax-loss harvesting is deliberately booking losses to lower your capital gains and hence tax. You can even carry forward your losses for up to eight financial years. In the video, we have explained how you can use tax-loss harvesting to reduce your tax.

But there are certain things you should keep in mind while practising tax harvesting and tax-loss harvesting. We have discussed them in this video as well.

Chapters
00:00 Introduction
01:41 Tax-Gain Harvesting
07:14 Tax-Loss Harvesting
10:52 Things to keep in mind while using tax harvesting

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[vanshanand]

Strategy only works for poor investors not for the people who trade around 50Lakhs in a year.

[swapniljoshi]

Sir please answer my query
In Tax harvesting
If I sell before 1 year then I will invite STCG which is 15% then don’t you think it is worst then paying LTCG

[raj]

In tax harvesting example, why should we book profit more than 1 lac and pay LTCG on that as well from year 6? Does it make a difference if we claim capital gains of only upto 1 lac from year 6 to 10, and claim the total capital gains only in year 10, and pay tax on that? I believe we should pay the same tax in both the cases, right?

[TheFourthWinchester]

Govt: Inflation. Pay up more and pay more taxes.
Govt when it comes to raising limits due to inflation and crippling loss of purchase power: *pikachu face*

[SaurabhYadav-engq]

Can you please explain the tax gain harvesting on international equity mutual fund?

[PrashantKg]

Sir If I make 1L in profits in LTCG in mutual fund, and I make say 15LPA (new regime) then I won't pay LCCG tax on MF but will that make my net income 16L, instead of 15L? and will that then increase my income tax?

[WalterWhite-ogwj]

Most pathetic approach to lose money.

Here's a fun fact: If you try to do tax loss harvesting every year that means your money will be out of the market for few days. Since we cannot know whether those will be the golden days for the market.

Even in the last 40 years of SENSEX, if someone have just lose 25 golden days, then their average returns reduces from 13.5% to 10%

[rohitkhandelwal]

Please correct me, but this is not at all good for long term investor, who is suppose thinking to make profit of like 80-90 lakhs, because in this case no matter how much you try, you will be taxed after profit goes above 1 lakh rupees

[Ankeshgupta]

Same day purchase and sale are not possible in stocks, as it would result in business income, should keep a gap of 1 day, but in mutual funds we can buy and sell on the same day- subject to liquidity.

[abhishekchatterG]

This was an excellent presentation with great visuals. Tax harvesting has always been a topic which I avoided because I thought I would never understand but I am wrong here. Now I'm thinking which one of my schemes to sell off 😂😂

[fanofkimi]

@ETMoney: does your ETMoney app offers this feature? Tax harvesting and tax loss harvesting?

[gauthamashok]

Sir
If we do so, how will ET Money or any app calculate Xirr.
It will be reset every time.

Also if sip is running and if we keep selling like this
We won't even know how much we have invested totally

[subhamag]

Good explanation, but I feel this is very difficult to execute in reality.

We would also never know our true XIRR as the money would be coming out and going in every year. Also, in most of the cases, we often choose to put more money in the same fund as the year progresses. (at least what I do).

So, It will become difficult to keep track of all the transactions.

[Ksquare]

Suppose "I have invested ₹1.5 lakhs each in two mutual funds, Parag and Kotak, totaling ₹3 lakhs in 2024.Considering Long-Term Capital Gains (LTCG), and an annual interest earned per year as follows:2025: ₹50, 000 each from Parag and Kotak2026: ₹50, 000 each from Parag and Kotak2027: ₹50, 000 each from Parag and Kotak2028: ₹50, 000 each from Parag and KotakIf I sell only Kotak in 2025, realizing ₹50, 000 in gains, how much tax would be implemented? If I sell only Parag in 2026, realizing ₹1 lakh in gains, what would be the taxable amount?"

[raghavvasudeva]

In case of SIP, should I increase the amount of SIP after redemption to reinvest it (in order to avoid LTCG) or invest it lump sum? Which way is better?

[AmishaRk-pesm]

Things to keep in mind is very important part. No one talks about it. Thanks Rajat for sharing this.

[binulallal]

Redeem capital gain of 1L from any fund and invest 1 L in the fund. Applicable for sip and lumpsum investors.

[rajatjain]

When we are selling the MF units on FIFO method and buying it again for the purpose tax havesting… we will be buying the units at a higher Nav and hence breaking the compounding effect. I believe compounding would be hit

[prem]

Please add the cost of transaction and this gap for tax hain harvesting will come down

[fyi]

Its a great concept to make videos on. But not practical and necessary if you are a long term investor and have multiple funds with multiple SIPs.