Tax Loss Harvesting Calculator – Offset Capital Losses & Save Tax

Calculate how much tax you can save by offsetting capital gains using losses as per Indian Income Tax rules. Plan your Capital Gains Tax with complete Budget 2026 Statutory Rules (12.5% LTCG / 20% STCG).

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Capital Gains & Losses

Equity Tax: 12.5% / 20%

Equity Taxation Rules (Latest)

STCG (<12m): 20%

LTCG (>12m): 12.5%

LTCG Exemption: ₹1.25 Lakh/yr

Loss Set-off Rules

STCL → Offset both STCG & LTCG

LTCL → Offset LTCG only

Carry Forward: 8 Years

Total Tax Saved

₹0

Tax Without Harvesting

₹0

Tax After Harvesting

₹0

Final Tax Liability Amount Saved
Final: ₹0 Saved: ₹0

Carry Forward Loss

₹0

Tax reduction %

0% Saved

Tax Loss Harvesting Rules in India

Navigating the complex rules of capital gains set-off is the first step in successful tax harvesting. According to current Indian tax laws:

  • STCL vs LTCL: Short Term Capital Losses (STCL) are highly flexible; they can be used to offset both STCG and LTCG. However, Long Term Capital Losses (LTCL) can only be set off against Long Term Capital Gains. Check your Capital Gains Tax liability for specific asset classes.
  • Set-off Order: The ITR software automatically applies the most beneficial set-off logic. Generally, it is better to offset STCG (taxed at 20%) before LTCG (taxed at 12.5%).
  • Carry Forward: If your total losses exceed your total gains in a financial year, you can carry forward the remaining loss for 8 assessment years to offset future profits. This is a vital component of long-term Retirement Planning.

How Tax Loss Harvesting Works in Real Life

Let's look at an example using numbers to see the impact of this strategy on your Net Worth:

Scenario: You have ₹5,00,000 in LTCG from mutual funds and a ₹2,00,000 unrealized loss in another stock.

  • 1. Without Harvesting: Tax on ₹5L LTCG = (5L - 1.25L exemption) × 12.5% = ₹46,875.
  • 2. With Harvesting: You sell the loss-making stock. New Net Gain = 5L - 2L = ₹3,00,000.
  • 3. New Tax: (3L - 1.25L exemption) × 12.5% = ₹21,875.
  • Cash Savings: ₹25,000 additional liquidity in your bank account.

When to use this? The best time is during market volatility or toward the end of the financial year (March). You can reinvest the proceeds immediately to maintain your SIP portfolio balance. Use a CAGR tool to ensure your long-term growth remains on track despite these short-term exits.

What is Tax Loss Harvesting?

Tax Loss Harvesting is a legal financial strategy where an investor sells securities (like stocks or mutual funds) that are currently trading at a loss to offset the capital gains tax liability of other profitable investments. By "realizing" these losses, you can reduce the net taxable income in your annual income tax planning.

In India, this is a popular strategy to optimize the portfolio before the end of the financial year. Since the introduction of 12.5% LTCG on equity in Budget 2024, harvesting has become even more critical for long-term investors using lumpsum mutual funds.

Frequently Asked Questions

What is tax loss harvesting?
It is selling loss-making investments to reduce your net capital gain, thereby paying lower capital gains tax. This is a common practice among Indian investors to optimize their XIRR returns.
Is tax loss harvesting legal in India?
Yes, it is a valid tax planning strategy allowed under the Income Tax Act for set-off and carry-forward of losses.
Can STCL offset LTCG?
Yes, Short Term Capital Loss (STCL) can be set off against both Short Term and Long Term Capital Gains. This is useful when you have significant gains in your lumpsum investments.
Can LTCL offset STCG?
No. Long Term Capital Loss can only be set off against Long Term Capital Gains. It cannot be used to reduce STCG.
How many years can losses be carried forward?
Both STCL and LTCL can be carried forward for 8 assessment years provided the tax return is filed before the due date.

Related Financial Tools

Gain Calc

SIP Tool

CAGR

Income Tax

Net Worth

Lumpsum

Disclaimer

Tax laws in India are subject to frequent changes. This calculator follows the latest Indian capital gains taxation rules as per Budget 2025. 4% health and education cess is included. Surcharge for high income individuals (above ₹50L) is not included. Always consult a Qualified Chartered Accountant for final tax filing.

Last Updated: March 2026