Indian Market is very volatile, one day it is going down by 2%, next day up by 1% and again down by 1.5%. So people are doing a lot of investments now who has the money to get some profit from this volatile market. Now the thing is whoever has invested in this market and got the profit, you have to pay the tax on your profit. If it's a short term profit them you have to pay around 20%.
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That means if you have earn around 10K, you have to pay 2K as profit. Now at the same time, some of your investments might have gone down. It's the perfect time to sell those stocks which are in loss, because then your total profit is less only. For example, you have a loss of Rs 5K and profit of Rs 10K, then your total profit is only Rs 5K. And 20% is only Rs 1K. So that means your gave saved Rs 1K from the tax which otherwise you have to pay.
So the tax loss Harvesting is a great way to reduce your tax burden. Say you sold the stocks today, you can buy the stocks again in 1 day time so that you don't lose out on the stock value. I am not saying that you should sell all your stocks which are on loss. You just find our your total tax liability and then sell stocks which can cover the losses. Means if your profit is Rs 1K and then only sell the stocks worth 1K. You can sell more also, you cab offset that value in the future years to come. But I would say if you are selling for the purpose if tax loss Harvesting then only sell which can offset the profit.
