*MUST READ* *Tax Harvesting in India: Save Part of Capital Gains Tax* Most investors overpay taxes without knowing this simple trick. Tax harvesting is a 100% legal way to reduce your tax bill and optimize profits. A must-know strategy for every Indian investor! 🧵👇 🔥 What is Tax Harvesting? A tax-saving technique where you sell loss-making investments to offset capital gains tax. It allows you to turn losses into tax savings and carry them forward for future gains. 💡 Smart investors do this every year to legally reduce taxes! 🧾 Capital Gains Tax in India: 📊 Short-Term Capital Gains (STCG): * Applies to stocks/mutual funds held < 1 year * Tax: 20% on profits 📈 Long-Term Capital Gains (LTCG): * Applies to stocks/mutual funds held > 1 year * Tax: 12.5% on gains above ₹1.25 lakh per FY (No indexation) 💡 If you don’t use tax harvesting, you’re leaving money on the table! 🚀 How Does Tax Harvesting Work? Step 1️⃣: Identify Loss-Making Investments Scan your portfolio for stocks or mutual funds trading below your purchase price. Step 2️⃣: Sell & Book the Loss Sell these assets before 31st March to realize the loss and reduce taxable gains. Step 3️⃣: Offset Capital Gains ➤ Use these losses to offset your STCG first (higher 20% tax). ➤ Remaining losses offset LTCG above ₹1.25 lakh. Step 4️⃣: Carry Forward Excess Losses If losses exceed gains, carry them forward for up to 8 years to offset future profits. Step 5️⃣: Reinvest Wisely Buy a similar but not identical stock/fund to maintain your investment exposure while complying with tax laws. 🔹 Simple, effective, and 100% legal. 💰 Why Every Investor Should Use Tax Harvesting: ✅ Save Lakhs in Taxes ✅ Clean Up Your Portfolio – Remove underperformers & free up capital. ✅ Offset Gains for 8 Years – Losses don’t go to waste! ✅ Plan Around the ₹1.25 Lakh LTCG Exemption ✅ Boost Net Returns – Reduce tax drag on your investments. 📅 Pro Tips for Maximizing Tax Harvesting: 1. Do It Before 31st March – Only losses booked before the FY-end count. 2. Use LTCG Exemption Smartly – Sell stocks with gains up to ₹1.25 lakh yearly (Tax-free). 3. Avoid Wash Sale Mistakes – Don’t repurchase the same stock immediately. Use similar but different stocks. 4. File ITR Properly – If you don’t file your capital loss in ITR, you can’t claim carry-forward benefits. 5. Plan Smartly with Mutual Funds – You can switch funds within the same category for better performance while harvesting losses. 📊 Example: Tax Harvesting in Action 👨‍💼 Investor Scenario: 🔹 ₹15 lakh STCG from stock sales (Tax @20% = ₹3 lakh) 🔹 ₹5 lakh loss from underperforming stocks Without Tax Harvesting: Total tax = ₹3 lakh With Tax Harvesting: Taxable Gain: ₹15L - ₹5L = ₹10L New Tax = ₹2 lakh 💰 Tax Saved: ₹1 lakh instantly! And if the ₹5 lakh loss exceeds this year’s gains? Carry it forward for up to 8 years and reduce future taxes! 🔥 Advanced Tax Harvesting Strategy (Pro-Level) 💎 Use the LTCG Exemption Hack Since LTCG under ₹1.25 lakh is tax-free, here’s how experts use it: ✅ Sell stocks with gains up to ₹1.25 lakh every year (no tax). ✅ Reinvest immediately in the same stock to reset your purchase price (cost basis). This reduces your future taxable gains—an optimized tax-saving compounding strategy! 🚀 🚫 Mistakes That Can Cost You Money: ⚠️ 1. Buying Back Too Soon (Wash Sale Mistake): * If you buy the same stock too soon, you may lose the tax benefit. * Instead, buy similar but different stocks/funds. ⚠️ 2. Forgetting to File Losses in ITR: * If you don’t report the loss, you can’t carry it forward for future gains. ⚠️ 3. Ignoring LTCG Exemption: * Many investors forget the ₹1.25 lakh LTCG tax-free limit—Use it every year! ⚠️ 4. Last-Minute Rush: * Tax harvesting should be planned before 31st March, not at the last minute. 🚀 Take Action Today & Save on Taxes: ✅ Review Your Portfolio – Identify tax-loss harvesting opportunities. ✅ Sell Loss-Making Investments – Before FY-end to offset gains. ✅ Reinvest Wisely – Don’t break compliance rules. ✅ File ITR Properly – To carry forward unused losses.