Outlook Money
Profit on equity investments with a holding period of up to one year is called short-term capital gain (STCG); investment with a holding period of over a year is called long-term capital gain (LTCG).
STCG on equity is taxed at a 15% rate. LTCG of up to Rs 1 lakh on equity investment is tax-free, whereas LTCG above Rs 1 lakh is taxed at 10%.
You can set off a long-term capital loss from LTCG to save the applicable tax. It allows to carry forward capital losses for the next 8 consecutive years, provided one files ITR every year.
You can book LTCG on equities before the end of every financial year so that the capital gain doesn’t exceed the Rs 1 lakh limit, and you can purchase them again the next day as fresh buying.
You can book LTCG on equity with an amount exceeding Rs 1 lakh to the extent you have a long-term capital loss carried forward in your books.
You may also book a fresh long-term capital loss for setting off from the LTCG that exceeds the Rs 1 lakh limit and repurchase the stocks later to reinstate your portfolio structure.
You can set off long-term capital losses with only LTCG, whereas you can set off short-term capital losses with both short and long-term capital gains, so plan tax harvesting accordingly.