Real-world capital gains tax scenarios (India)
See how TaxHarvestLab applies Indian tax rules to real investor portfolios. Each scenario demonstrates the reasoning behind our recommendations.
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Gain Harvesting
Strategically realize gains to utilize tax exemptions
Using the Rs 1.25L LTCG exemption efficiently
I should book all my Rs 3L unrealized gains to reset my cost basis.
Current Position
Recommendation
Tax Outcome
Remaining unrealized LTCG: Rs 1,75,000. Cost basis reset for booked shares.
Only book Rs 1.25L - the annual exemption limit. Booking more would trigger 12.5% tax on the excess. The remaining Rs 1.75L should stay unrealized and can be harvested in future years using future exemptions. The exemption doesn't carry forward, so use it fully each year but don't exceed it.
Practical note
Some investors sell positions purely for tax reasons and later re-enter the same stock to maintain market exposure. TaxHarvestLab does not execute trades or provide guidance on when or whether to re-enter positions.
Loss Harvesting
Realize losses to offset gains and reduce tax liability
Offset realized STCG with unrealized STCL
I should hold my losing positions - they might recover.
Current Position
Recommendation
Tax Outcome
Tax saved: Rs 16,000 (80K x 20%). Can rebuy same stocks after 1 day.
STCL directly offsets STCG at 1:1 ratio. By booking the Rs 80K loss, your taxable STCG reduces from Rs 1L to Rs 20K. This saves Rs 16,000 in taxes at 20% rate. You can repurchase the same stocks immediately (no wash sale rule in India) to maintain your position while crystallizing the tax benefit.
Practical note
Some investors sell positions purely for tax reasons and later re-enter the same stock to maintain market exposure. TaxHarvestLab does not execute trades or provide guidance on when or whether to re-enter positions.
Cross-Term Shielding
Use short-term losses to offset long-term gains
Cross-term shielding: STCL offsets LTCG
Short-term losses can't offset long-term gains, right?
Current Position
Recommendation
Tax Outcome
STCL first reduces LTCG to Rs 1L, then exemption covers remaining. Zero tax.
Under Indian tax law, STCL CAN offset LTCG (but LTCL cannot offset STCG). Your Rs 1L STCL first reduces LTCG from Rs 2L to Rs 1L. The Rs 1.25L exemption then covers the remaining Rs 1L entirely. Result: Zero taxable gains despite Rs 2L in realized LTCG.
Mixed portfolio: strategic offset sequencing
This is complicated - I'll just hold everything.
Current Position
Recommendation
Tax Outcome
Tax after harvesting: Rs 7,125. Without harvesting: Rs 18,875. Savings: Rs 11,750.
By booking both losses, the offset sequence is: (1) STCL Rs 40K offsets STCG Rs 60K, leaving Rs 20K STCG taxable. (2) LTCL Rs 30K offsets LTCG Rs 1.8L, reducing it to Rs 1.5L. (3) LTCG exemption Rs 1.25L applies, leaving Rs 25K LTCG taxable. Final tax: Rs 25K × 12.5% + Rs 20K × 20% = Rs 3,125 + Rs 4,000 = Rs 7,125. Without harvesting the losses, you'd pay Rs 18,875 in tax. Harvesting saves Rs 11,750.
No Action Required
Understanding when NOT to act is equally important
STCG only - booking more gains increases tax
Should I book gains to reset my cost basis?
Current Position
Recommendation
Hold current positions
Tax Outcome
STCG has no exemption. Any additional booking only increases tax liability.
Unlike LTCG, there is no exemption for STCG - every rupee is taxed at 20%. Booking additional STCG now would only increase your tax bill without any offsetting benefit. The cost basis reset argument doesn't apply to short-term holdings. Best action: wait for positions to become long-term (>12 months) before considering any realization.
Unrealized loss with no gains to offset
I should book my losses to claim the tax benefit.
Current Position
Recommendation
Hold current positions
Tax Outcome
No realized gains to offset. Booking loss now would only create carry-forward.
Losses only provide tax benefit when they offset gains. With zero realized gains this year, booking the loss now creates a carry-forward that can be used in future years. However, carry-forward losses have limitations: they expire in 8 years and require filing ITR on time. Unless you expect significant gains later this year, holding the position preserves optionality.
Carry Forward Losses
Utilize losses from previous years to offset current gains
Carry-forward LTCL expands effective exemption
Current Position
Recommendation
Tax Outcome
CF-LTCL (75K) + Exemption (1.25L) = Rs 2L tax-free LTCG booking capacity.
Carry-forward losses from previous years first offset current gains, THEN the Rs 1.25L exemption applies to any remaining gain. With Rs 75K CF-LTCL, you can book Rs 2L in LTCG tax-free: Rs 75K offset by CF-LTCL, remaining Rs 1.25L covered by exemption. This is optimal utilization of both the expiring CF loss and the annual exemption.
Carry-forward already consumed by realized gains
Current Position
Recommendation
Hold current positions
Tax Outcome
CF-LTCL (50K) already applied. Additional booking would be fully taxable.
Your realized LTCG of Rs 3L is already partially shielded: Rs 50K CF-LTCL + Rs 1.25L exemption = Rs 1.75L shielded. Taxable LTCG = Rs 3L - Rs 1.75L = Rs 1.25L. Booking additional unrealized LTCG now would add directly to taxable gains with no further offsets available. Better to defer to next year when fresh exemption is available.
Key Takeaways
LTCG Exemption is Use-it-or-Lose-it
The Rs 1.25L exemption doesn't carry forward. Book gains annually to maximize benefit.
STCL Can Offset LTCG
Cross-term offsetting allows STCL to shield LTCG, but LTCL cannot offset STCG.
No Wash Sale Rule in India
You can sell to book a loss and rebuy immediately without losing the tax benefit.
STCG Has No Exemption
Every rupee of STCG is taxed at 20%. Don't book STCG unless offsetting with losses.
Carry-Forward Expires
Losses can only be carried forward for 8 years. Prioritize older CF losses.
Sometimes Inaction is Best
Not every scenario requires action. Know when to hold and when to fold.
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