Tax Loss Harvesting & LTCG Exemption Reset in Indian Equities
Verified Indian financial mathematics, statutory regulations, and step-by-step actionable breakdowns.
Executive Summary & Key Takeaways
- •Section 112A permits ₹1.25 Lakh of equity LTCG profit completely tax-free every single financial year.
- •LTCG harvesting resets your purchase price upwards without altering your core long-term portfolio allocation.
- •Short-term capital losses can be set off against both STCG and LTCG gains.
The ₹1.25 Lakh Tax-Free Threshold Hack
Under Section 112A of the Indian Income Tax Act, long-term capital gains (LTCG) on listed equity shares and equity mutual funds are 100% tax-exempt up to ₹1.25 Lakh per financial year. If you do not book this gain before March 31st, the exemption window lapses forever.
How LTCG Tax Harvesting Works
Suppose you have ₹1,20,000 in unrealized long-term profits in a Nifty 50 Index Fund. Sell the units to realize the ₹1.20 Lakh gain (which is 100% tax-free within the ₹1.25L limit). Immediately reinvest the redemption proceeds back into the same index fund. Your investment units are now reset at the higher current NAV, drastically slashing your future tax bill upon eventual retirement redemption!
Frequently Asked Questions
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