Mumbai: The Sensex and Nifty and other indices have taken a severe beating in the last few months. Numerous stocks, which were trading at record high are now 40-50 per cent down. The investors, whose stock market portfolio is in negative but made profits in the first half of 2024-25 when the market was at its all time high, then the individual has the chance to take advantage against the tax levied on the profits.
This type of tax saving process is called tax loss harvesting. The losses incurred due to investment in one asset can be adjusted against the capital gain tax levied on the profit earned in other assets. When losses are deducted from profits, it reduces the total taxable income. In this way, losses in the market become a solid means of tax saving for you.
Stock Market loss: How to do tax loss harvesting?
A stock market investor needs to identify the stocks or mutual funds in the portfolio which are in the negative zone. The investor needs to sell the loss-making stocks and funds before March 31, 2025 so that the loss can be booked in the current financial year. After the shares or MF units are sold, the individual can adjust this loss against the capital gain, which will help reduce the total tax liability. Notably, if the person wants to buy back the same stock and funds, he/she can do it immediately. However, while doing this, follow the ‘wash sale rules’, so that tax related problems can be avoided.
The stock market investors planning to avail the benefit of tax loss harvesting, should not forget the 31st March deadline as this is the last day of the financial year. If any investor books the losses in shares after this date, then the adjustment will be done in the next financial year, due to which the person will not be able to avail the benefit of tax savings of 2024-25.
While adjusting capital loss against capital gain, an individual should make sure that a loss making transaction is set off against a profit making transaction. If there is a loss of Rs 5 lakh in one transaction and a profit of Rs 7 lakh in the other, then it cannot be done that this transaction can be set off for just Rs 2 lakh.
Big benefit of short term losses
Short term capital gain losses can be set off against both short term capital gains and long term capital gains. However, long term capital loss can only be set off against long term capital gain. Set off simply means that here the total income along with capital gain is adjusted with the capital loss.
(Disclaimer: This article is only meant to provide information. News9 does not recommend buying or selling shares or subscriptions of any IPO, Mutual Funds and crypto assets.)
If you have also suffered a loss in the share market, then you can use this loss for tax saving. Markets Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
