Tax-Loss Harvesting Calculator

What is tax-loss harvesting?

Selling investments that are below your purchase price before 31 March, so the loss cancels gains you have already booked and your capital gains tax falls. If you still like the investment, you buy it back; your holding is the same, but this year’s tax is lower. Its mirror image, gain harvesting, books long-term gains up to the ₹1.25 lakh tax-free limit to raise your cost. The calculator works out both.

How are capital losses set off?

Short-term losses can be set off against any capital gain; long-term losses only against long-term gains. The ₹1.25 lakh exemption applies to long-term gains left after set-off.

Short-term gains on listed shares and equity funds are taxed at 20% under Section 196 (formerly 111A); long-term gains at 12.5% above ₹1.25 lakh a year under Section 198 (formerly 112A); both plus cess and surcharge capped at 15%. So set short-term losses against short-term gains first. The Income-tax Act, 2025 renumbered the set-off and carry-forward sections but kept the rules.

Tax-loss harvesting example

With ₹1.5 lakh of short-term and ₹3 lakh of long-term gains booked, booking a ₹60,000 short-term loss and a ₹1 lakh long-term loss cuts the tax from ₹53,950 to ₹28,470, saving ₹25,480.

How much loss should you book?

Only enough to bring your long-term gains down to ₹1.25 lakh and your short-term gains to zero. Beyond that, a loss is set off against gains that were tax-free anyway; set-off is compulsory, so it does not carry forward.

Say you have booked ₹2 lakh of long-term gains and hold a stock with a ₹1 lakh long-term loss. Booking ₹75,000 of it saves ₹9,750. Booking the full ₹1 lakh saves the same ₹9,750 and throws away ₹25,000 of loss. Sell just enough units to realise ₹75,000, or keep the loss for a year when your gains are higher. Losses carry forward only when they exceed all your gains for the year.

Carrying losses forward

Unused capital losses carry forward for 8 years, but only if you file your return by the due date, in ITR-2 or ITR-3.

• Short-term losses brought forward can be set off against any capital gain in later years; long-term losses only against long-term gains.
• They are used up automatically. A brought-forward loss is set off against the next gains you book, even gains within the ₹1.25 lakh exemption. With ₹1 lakh of long-term loss brought forward and ₹1.5 lakh of long-term gains this year, the whole loss is used and the tax was nil either way. Plan bigger sales in years when you can use the loss fully.
• A late return loses the carry forward of this year’s loss, so file on time even if you owe no tax.

Gain harvesting: using the ₹1.25 lakh exemption

If your long-term gains this year are below ₹1.25 lakh, sell enough holdings with long-term gains to reach ₹1.25 lakh, tax free, and buy them back. Your cost rises, so less of the gain is taxed when you finally sell.

Each ₹1.25 lakh harvested can avoid ₹16,250 of tax later (12.5% plus cess). Done every year for 10 years, that is ₹1.62 lakh of tax avoided on a long-held portfolio. Two cautions: do not harvest gains in a year when you have losses to carry forward, because the new gains would use up the losses instead of the exemption; and the bought-back shares start a fresh 12-month holding period.

Is it legal? Wash sales and other traps

Yes. India has no wash-sale rule, so you can sell at a loss and buy back. But a few rules and costs still matter.

• Dividend and bonus stripping: a loss on units or shares bought shortly before a dividend or bonus record date and sold soon after can be disallowed. Do not harvest around record dates.
• Sell and buy on different days for shares; a same-day sell and buy is netted as intraday trading, which is speculative and does not create a capital loss.
• GAAR, the general anti-avoidance rule, applies only where the tax benefit of an arrangement exceeds ₹3 crore, so it does not affect ordinary investors.
• Costs: securities transaction tax of 0.1% on each side of a delivery trade in shares, brokerage, stamp duty on the purchase, and any exit load on funds. Make sure the tax saved is larger.
• The 12-month clock restarts on what you buy back, so a later sale within a year is short term at 20%.

When to do it

Before 31 March, the last day of the financial year; in practice, by the last trading day before it. For shares the trade date decides the year. For mutual funds it is the date the redemption gets its NAV, so place the order before the 3 pm cut-off, and allow for late-March market holidays. Doing it a week early leaves room for mistakes.

Debt funds, F&O and intraday trades

• Debt funds bought from 1 April 2023: gains are always short term and taxed at your slab rate, and losses are short-term losses, which can be set off against equity gains too.
• Futures and options: business income, not capital gains. F&O losses cannot be set off against capital gains, and capital losses cannot be set off against F&O profit.
• Intraday equity trades: speculative business income. Losses set off only against speculative income and carry forward for 4 years.
• US and other foreign shares: long term only after 24 months, at 12.5% with no exemption. See the US Stocks & RSU Tax Calculator.

When to use a different calculator

• Gain on a single sale of shares, funds, gold or property? Use the Capital Gains Tax Calculator.
• Your total tax for the year? Use the Income Tax Calculator.
• Returns on a fund you want to switch out of? Use the Mutual Fund Returns Calculator.