Tax-loss harvesting that respects Indian tax law (not US copy-paste)
Add your portfolio, enter the gains you've already booked this FY, and the tool picks the smallest set of losers to sell to wipe out tax. STCG vs LTCG aware, ₹1L LTCG exemption modeled correctly, and a wash-sale section that cites actual ITAT case law instead of misapplying US Section 1091.
Step 1 — Your realised gains this FY
Numbers from your broker's 'Realised P&L' for FY 2025-26 (1-Apr-2025 to 31-Mar-2026). These are what we'll try to offset.
Step 2 — Current holdings
Add each holding. Edit cells inline. The "Sell?" checkbox marks scrips for harvesting; the auto-suggest button picks an optimal set.
| Symbol | Asset | Qty | Buy date | Buy ₹ | Now ₹ | P&L | Type | Sell? |
|---|
Scenario A — Do nothing
Scenario B — Harvest marked losses
How the optimiser picks losers for you
The set-off rules in the Income Tax Act are asymmetric, so a naive "sell all losers" approach can waste capacity. Here is the order:
(both 15%)
2. STCL → offsets LTCG (arbitrage: shelter 10% gain with 15%-rate loss)
3. LTCL → offsets LTCG only (LTCL CANNOT offset STCG)
4. Unutilised loss → carry forward 8 AYs (only if ITR filed on time)The auto-suggest greedy-picks losers in this priority: STCL first (most flexible), LTCL only up to LTCG remaining after STCL has done its work. It also respects the ₹1L LTCG exemption — if your LTCG is ≤ ₹1L, harvesting LTCL against it is wasted capacity (you'd be sheltering already-exempt gain).
Why the ₹1 lakh trap matters
Suppose realised LTCG = ₹90,000. Below the ₹1L Section 112A exemption — zero tax. If you harvest a ₹90,000 LTCL to "save tax", you save nothing AND lose the loss (carry forward only 8 years). The optimiser refuses to harvest LTCL when LTCG is already exempt.
Why "30-day rule" is guidance, not law, in India
Half the internet copies the US wash-sale rule (Section 1091, IRC) and asserts it applies in India. It doesn't. The Indian Income Tax Act has no codified wash-sale provision. What we do have is judicial precedent.
The "colourable device" doctrine
In McDowell & Co. v. CTO and reinforced through ITAT rulings (notably the Vodafone-International line), courts disallow transactions that are "contrived" — i.e., where the only economic purpose is tax. A typical fact pattern that gets disallowed:
- Sell scrip on T+0 in the morning.
- Buy back the same scrip the same day (or within a few days).
- No change in economic position. Pure paper loss.
Conservative practice: wait 30+ days before re-buying the exact same scrip. Or buy a different but correlated scrip (sell HDFC Bank, buy ICICI Bank — preserves sector exposure, indisputably a different security).
What's safe
- Selling at a loss and not re-buying. Always safe.
- Selling and buying a different scrip in the same sector. Safe.
- Selling and re-buying after 30 days. Highly defensible.
- Spouse / HUF buys it the same day. Risky — clubbing under Section 64 may bring the position back to you for tax purposes.
The March hustle — when to harvest
1. Harvest in February, not 31-March
By late February you have visibility on FY gains and 30-day buy-back is still inside the FY. If you harvest on 28-March and want to re-buy the same scrip safely, you're forced into next FY — fine, but the optionality is reduced.
2. Pair STCL with LTCG for an arbitrage
STCL at 15%-rate offsetting a 10%-rate LTCG is the only place in Indian capital-gains law where a low-rate gain absorbs a high-rate loss. Net result: you "save" 15% on the LTCG that would have been taxed at 10% — i.e., you preserve a 5% loss for future years. Counter-intuitive but legal.
3. Don't harvest below ₹1L LTCG
As covered above. Save the LTCL for a year when you have >₹1L LTCG.
4. File ITR before due date to carry forward
Section 80 says capital losses cannot be carried forward unless the return is filed by the due date (31 July for non-audit individuals, extended occasionally to mid-August). Belated filing kills the carry-forward. Setoff in the same year still works.
5. Keep contract notes for 8 years
If you carry forward losses, the AO can reopen up to AY+10 in some cases. Keep broker contract notes (PDF download from console), bank statements showing fund flow, and ITR ack for every year.
Common questions about tax-loss harvesting in India
Does India have a wash-sale rule?
No codified rule (unlike US Section 1091). However, ITAT case law (McDowell, Vodafone line) treats contrived round-trips as "colourable devices" and disallows the loss. Conservative: 30-day gap before re-buy.
Can STCL offset LTCG?
Yes. STCL can offset both STCG and LTCG in the same FY. But LTCL can ONLY offset LTCG.
How long do unutilised losses carry forward?
8 assessment years — but ONLY if the ITR is filed before the due date. Belated filing = carry-forward forfeited.
Should I harvest if my LTCG is below ₹1L?
No. Up to ₹1L LTCG is exempt under Section 112A; harvesting LTCL against exempt gain wastes the loss.
Does this work for mutual funds?
Yes for equity MFs (12-month STCG/LTCG cutoff applies). Debt MFs purchased after 1-Apr-2023 are slab-rate regardless of holding — different math; toggle the asset-type column.
Will harvesting trigger STT scrutiny?
No. STT is paid on every market trade and unrelated to IT scrutiny. Harvesting is normal portfolio rebalancing.
Is selling and buying same day OK?
Risky. Same-day round-trip leaves no economic gap and looks contrived. ITAT decisions have disallowed such losses. 30-day gap or buy-similar-different-scrip is safer.
What about derivatives losses?
F&O losses are non-speculative business income (Circular 1/2014), not capital losses. Different schedule (P&L head), out of scope here.