Question 1

What is Tax Loss Harvesting in India?

Accepted Answer

Tax loss harvesting involves selling loss-making mutual fund or stock investments to realize capital losses, which can offset taxable capital gains and reduce your income tax liability.

Question 2

How does the ₹1.25 Lakh LTCG exemption harvesting work?

Accepted Answer

Under Section 112A, the first ₹1,25,000 of LTCG each financial year is 100% tax-free. By selling and immediately repurchasing units before March 31, you step up your purchase price with ₹0 tax liability.

Question 3

Can I set off Short-Term Capital Loss against Long-Term Capital Gain?

Accepted Answer

Yes, under Section 70(2), Short-Term Capital Losses (STCL) can be set off against both STCG and LTCG. Long-term capital losses can only offset LTCG.