Rs 94 lakh cr investor wealth wiped from D-St, however tax loss harvesting may also help recuperate setbacks. Right here’s how
Within the July 2024 funds, Finance Minister Nirmala Sitharaman revised the STCG and LTCG charges, rising the short-term capital features tax from 15% to twenty%. Shares held for lower than 12 months might be topic to STCG.
LTCG has been elevated to 12.5% on revenue exceeding Rs 1.25 lakh, with shares required to be held for 12 months or extra.
Tax loss harvesting entails promoting securities, shares, or mutual funds at a loss to offset taxable capital features and scale back total tax legal responsibility.
India’s benchmark indices, Nifty and BSE Sensex, have declined almost 15% from their peak, with broader markets witnessing even sharper promoting. Traders’ wealth has eroded by Rs 94 lakh crore for the reason that September 27, 2024, peak, because the market capitalization of BSE-listed firms fell from Rs 479.10 lakh crore to Rs 385 lakh crore as of Tuesday, March 4, 2025.
“Coping with and planning taxes may be intimidating, particularly for laymen. Given the latest market downturn, buyers can use the tax loss harvesting methodology to attenuate their tax outgo,” stated Divya Bhanushali, CPO at TaxBuddy.com.
Traders ought to word that securities offered earlier than July 23, 2024 (Funds 2024 day), might be topic to a 15% tax, whereas these offered on or after July 23, 2024, might be taxed at 20%, stated Adhil Shetty, CEO of BankBazaar.com.
Methods to do tax loss harvesting?
“They [investors] must determine the shares and mutual funds of their portfolio which can be at the moment at a loss to offset in opposition to the capital features earned in the course of the yr. This enables them to leverage the declining pattern, scale back tax legal responsibility, and reinvest the saved quantity into belongings that serve the same position of their portfolio,” stated Bhanushali of TaxBuddy.com.
Situation 1: STCG made earlier than July 23, 2024
In the event you earned Rs 1 lakh as short-term capital features (STCG) earlier than July 23, 2024, you’ll be taxed at 15%, leading to a tax cost of Rs 15,000.
Now, suppose you had shares with an unrealized lack of Rs 60,000 and offered them earlier than the funds announcement. You possibly can offset this loss in opposition to your STCG, lowering your taxable STCG to Rs 40,000. At a 15% tax fee, your tax legal responsibility would now be Rs 6,000, saving you Rs 9,000 in comparison with the unique tax legal responsibility of Rs 15,000.
Situation 2: STCG made after July 23, 2024
In the event you promote (or have offered) shares on or after July 23, 2024, the brand new tax fee of 20% will apply. With Rs 40,000 in taxable STCG after offsetting losses, your tax legal responsibility can be Rs 8,000, leading to financial savings of Rs 7,000.
Situation 3: LTCG made earlier than July 23, 2024
For long-term capital features (LTCG) earlier than July 23, 2024, revenue as much as Rs 1 lakh is tax-exempt. Any quantity above this threshold is taxed at 10%.
For instance, in case your LTCG is Rs 1,10,000, your taxable revenue can be Rs 10,000, and at a ten% tax fee, your tax legal responsibility can be Rs 1,000.
Situation 4: LTCG made after July 23, 2024
Following the funds announcement, a tax rebate applies to LTCG revenue as much as Rs 1.25 lakh. Any revenue above that is taxed at 12.5%.
For instance, in case your LTCG is Rs 2 lakh, your taxable revenue can be Rs 75,000. At a 12.5% tax fee, your tax legal responsibility can be Rs 9,375.
7 tricks to save your tax:
1) Bhanushali suggested buyers to prioritize offsetting short-term features, as they’re taxed at a better fee.
2) “Optimize tax on dividends and curiosity revenue by switching from dividend-paying shares to growth-focused funds,” stated Bhanushali, who can also be a chartered accountant.
3) She added that buyers who don’t declare many deductions might profit from switching to the brand new tax regime, which provides decrease slab charges and will assist scale back tax legal responsibility.
4) Investments in ELSS mutual funds qualify for deductions below Part 80C of the Revenue Tax Act, with a lock-in interval of three years, famous Shetty of BankBazaar.com.
5) Shefali Mudra, a tax knowledgeable at ClearTax, defined that short-term losses may be offset in opposition to each short-term and long-term features, whereas long-term losses can solely be offset in opposition to long-term features.
6) Mudra additionally highlighted the choice to hold ahead unused losses—if capital losses exceed features, buyers can carry them ahead for as much as eight years to offset future capital features.
7) For sensible rebalancing, she advisable repeatedly adjusting portfolios to align with monetary objectives and threat tolerance whereas leveraging tax loss harvesting alternatives. She additionally steered tax-saving devices like fastened deposits (FDs) and Public Provident Fund (PPF) for buyers submitting their revenue tax returns below the brand new regime.
(Disclaimer: Suggestions, strategies, views and opinions given by the specialists are their very own. These don’t symbolize the views of Financial Instances)
