Indian Market is going down and now the financial year is also going to end on March 31st. So whoever has madr a profit on this year by selling the stocks can have an opportunity to offset the gains with the losses. Offsetting the tax gain with the losses is knows s as Tax Loss Harvesting. And it is completely legal thing to do.
For example, I have around 50K Short Term Capital Gain profit in the last year. Now I have to pay 20% that is Rs 10K as taxes. Now at the same time I have some stocks which are in losses and those losses are around Rs 20K. So now if I realize the Loss and sell the stocks then my tax liability will reduce to Rs 30K and thus I have to pay just 6K as tax. So I will save 4K rupees this year in taxes.
Now the stocks which I have sold can be rebought next day or in few days to get hold of that stock again or we can buy similar stocks later. As I said it is perfectly legal and a lot of investors do this to save taxes. The only thing is that there are rules regarding LTCG Tax Loss Harvesting and STCG Tax Loss Harvesting which you can get more understanding by looking at the above Video.
Last year I have done the tax loss Harvesting and I will also do this year. Now why this is the right time to do Tax Loss Harvesting. First of all the market has gone down so we will have some stocks in our portolfio which are in losses and thus we can sell those stocks. Next the financial year is getting ended on 31st March and thus we can use this opportunity to save more taxes in this financial year. Next we can also use this opportunity to remove some of the non performing stocks from pur portfolio and buy some good stocks.
