Tax 2026: As investors book profits from assets such as equities, mutual funds, gold and real estate, capital gains tax often becomes an unavoidable reality. However, tax experts say that with structured planning, individuals can significantly reduce \u2014 and in some cases even eliminate \u2014 their tax burden in a given financial year.<\/p>
Capital gains arise when the selling price of an asset exceeds its acquisition cost after adjusting for transfer expenses. While such gains are taxable, the Income Tax Act offers several legal routes to minimise liability \u2014 including reinvestment exemptions, strategic timing of sales and the disciplined use of capital losses.<\/p>
One of the most powerful yet underutilised tools is tax-loss harvesting, a strategy that involves selling loss-making investments to offset gains elsewhere in the portfolio.<\/p>
\u201cTax loss harvesting simply means using your losses as tax assets. Most investors ignore losing stocks emotionally, but from a tax perspective, losses are extremely valuable,\u201d said CA Ruchita Vaghan in a recent post on X.<\/p>
Under Indian tax rules, short-term capital losses (STCL) can be adjusted against both short-term and long-term gains, while long-term capital losses (LTCL) can only be set off against long-term gains. This distinction makes end-of-year planning crucial.<\/p>
\u201cThe biggest mistake investors make is not understanding the set-off rules. STCL is flexible, but LTCL is restrictive \u2014 and that changes how you plan your exits,\u201d Vaghan said.<\/p>
She explains that even investors sitting on profits in equities can legally reduce future tax by booking gains strategically. Since long-term capital gains (LTCG) on equity are taxable only above \u20b91 lakh per year, investors can periodically sell and reinvest holdings to reset their purchase cost.<\/p> <\/article> <\/article> \u201cBy harvesting LTCG up to the exempt limit every year, you reduce your future tax burden. It\u2019s one of the cleanest and most ignored tax strategies,\u201d she noted.<\/p>
Losses that cannot be set off in the same year are not wasted. They can be carried forward for up to eight assessment years, provided the income-tax return is filed on time. Missing the filing deadline means permanently losing the benefit.<\/p>
\u201cPeople lose crores worth of tax shields simply because they file late. Carry-forward is a privilege \u2014 not a right \u2014 and it comes with discipline,\u201d Vaghan said.<\/p>