Tax Harvesting: Save Capital Gains Tax Before March 31!

• Tax harvesting is a strategy to reduce capital gains tax by booking profits or losses on investments.
• It involves selling shares or mutual funds to record gains/losses for tax purposes, then repurchasing to maintain portfolio.
• Up to ₹1.25 lakh in Long Term Capital Gain (LTCG) is tax-free annually if STT is paid; exceeding this is taxed at 12.5%.
• Tax loss harvesting allows setting off investment losses against profits to reduce overall tax liability.
• Applicable to listed shares and equity mutual funds for tax-free LTCG; other capital assets can be used for loss harvesting.

Key Questions Answered

How does tax harvesting strategically reduce capital gains tax liability?

Tax harvesting reduces capital gains tax by strategically booking gains within the tax-free threshold or realizing losses to offset taxable gains.

What are the key differences between tax harvesting and tax loss harvesting?

Tax harvesting involves booking gains or losses to reduce tax outgo, while tax-loss harvesting specifically means selling investments at a loss to offset capital gains.

Can tax harvesting be effectively applied to all types of investment assets?

Tax harvesting can be applied to various investment assets, including listed shares and equity-oriented mutual funds.