How to Pay ZERO Tax on STOCK MARKET INCOME #shorts

How does Tax Loss Harvesting work? Most investors prefer using this strategy at the end of the financial year when they need to file returns. But you can use it throughout the year in a planned manner to keep your…

How to Pay ZERO Tax on STOCK MARKET INCOME #shorts

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How does Tax Loss Harvesting work?
Most investors prefer using this strategy at the end of the financial year when they need to file returns. But you can use it throughout the year in a planned manner to keep your capital gains at a relatively lower level. Tax-loss harvesting starts with the sale of the stock or an equity fund that is experiencing a consistent price decline. You feel that the security has lost most of its value and chances of a rebound are bleak. Once the loss is realized, you offset it against capital gains that your portfolio has earned over the period.

Let’s understand this with an example. Suppose in a given financial year your portfolio made an STCG and LTCG of Rs 1,00,000 and Rs 1,05,000 respectively. The short-term capital losses were Rs 50,000.

Tax payable (Without tax loss harvesting) = [(Rs 100,000 * 15%)+{(105,000-100,000)*10%}] = Rs 15,500

Tax payable (With tax loss harvesting) = [{(Rs 100,000-Rs 50,000) * 15%)}+{(105,000-100,000)*10%}] = Rs 8,000

Moreover, it keeps the portfolio’s risk-return profile intact. Among other measures, tax-loss harvesting is a vital tool to save a lot on taxes. Additionally, you get to know ways to diversify your portfolio to earn higher returns. It doesn’t help to nullify the losses, but it can reduce your suffering by helping you save taxes.

Source: ClearTax – http://bit.ly/3OwZhEB

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