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Tax Loss Harvesting

Background

Tax loss harvesting is the practice of realising capital losses by selling investments that are down, so those losses can offset capital gains elsewhere and reduce your tax bill.

Explanation

You may sell a losing investment, book the loss and reinvest in a similar but not identical asset to maintain exposure. Set-off and carry-forward rules define how and when losses can be used. It is a tactical move that should support, not replace, a sound long-term plan.

Example

If you have ₹1.5 lakh of realised equity gains this year and another equity fund shows an unrealised ₹70,000 loss, selling and rebalancing that loss-maker can reduce your net taxable gain to ₹80,000, possibly staying within exemption bands.

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