Year end and the Tax Harvesting Ritual

A lot of chatter on the social media is on how one can save on tax by harvesting the gains/losses. However, a lot of information which is floating around is not which should be actioned upon.

At the outset, foremost advice - consult your CA or tax advisor on the transaction before doing the same. Do not fire the bullet first and then ask your CA now what to do.

First of all check, do you have any realised capital gains or losses? If the answer is YES, then only think of tax harvesting.

If you have gains then you SHOULD do tax harvesting; but keep in mind the following:

Long term capital loss cannot be set off against short term capital gains.

Short term capital loss can be set off against long term and short term capital gains.

If you have losses then you SHOULD NOT ideally do tax harvesting as you are allowed to carry forward your losses for 8 years. Tax harvesting to be done only if the 8 years are expiring.

No capital gains or losses realised - Please do not book gains and losses just for the heck of doing tax harvesting. Many advisors may advice, but if you are not impacted, why disturb your portfolio?

Only exception - to the extent of Rs. 1.25 lacs from the unrealised long term capital gains exemption can be booked to lockin gains.

Bottom line:
Tax harvesting is situational. Everything else is just unnecessary activity presented as strategy.

Please bear in mind that doing tax harvesting also exposes to price risks as well as transaction costs.

So be mindful and happy harvesting!