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| Examples for Tax Loss Harvesting |
| 1) Short Term Capital Gain |
| Assume that you have made a Short Term Capital Gain (STCG) of ₹1,00,000 this year. You would have a 15% tax liability i.e. ₹15,000 on the same. Also assume that you are currently holding some stocks where you have a unrealized loss of ₹80,000. You can sell these stocks and set off the loss of ₹80,000 against STCG of ₹1,00,000. Hence, you would only need to pay 15% tax on ₹20,000 which is ₹3,000, thereby saving ₹12,000 |
| Once this Tax harvesting activity is completed, you can again buy the same stock or a similar scrip, maintaining optimal asset allocation and expected returns |
| 2) Long Term Capital Gain |
| Assume that you have made a Long Term Capital Gain (LTCG) of ₹3,00,000 this year. You would need to pay 10% tax on the (₹3,00,000 - ₹1,00,000*) = ₹2,00,000 i.e. ₹20,000. Also assume that you are currently holding some stocks where for more than 1 year and you have an unrealized loss of ₹1,50,000. You can sell these stocks and set of the loss of ₹1,50,000 against LTCG of ₹2,00,000. Hence, you would only need to pay 10% tax on ₹50,000 which is ₹5,000, thereby saving ₹15,000 |
| *First & ₹1,00,000 made in LTCG would be tax free and any gain above that would be taxed at & ₹ 10% |
| While setting off losses in tax harvesting, you need to keep following points in mind 1. Long term capital losses can be set off only against long term capital gain. 2. Short term capital losses can be set off against short term capital gains or long term capital gains. |
| Note: |
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1) The tax liability explained here is a guideline, we suggest you to consult your tax advisor to understand the exact tax liabilities. 2) Please note that the amount given in the above examples are hypothetical and have no relevance to your portfolio. You may calculate the amount of STCG/ LTCG based on your portfolio. |