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 simple, completely legal strategy where you sell stocks or mutual fund units that are currently in the red to balance out the profits you made on other winning investments. By booking these losses before March 31st, you reduce your net taxable gains and pay less tax.

With long-term capital gains tax at 12.5% on equities, harvesting is an easy way to keep more of your returns. Calculate your net liability across assets using our capital gains tax calculator, integrate savings into your yearly filing with our income tax calculator, and avoid late payment interest by reviewing your quarterly dues with our advance tax calculator.

Capital Loss Set-off & Carry Forward Matrix (Section 70 & 71)

Nature of Capital Loss Permissible Set-off Against Disallowed Set-off Carry Forward Limit
Short-Term Capital Loss (STCL)BOTH Short-Term and Long-Term GainsCannot set-off against Salary or Business Income8 Assessment Years
Long-Term Capital Loss (LTCL)ONLY Long-Term Capital GainsCANNOT set-off against STCG or any other income head!8 Assessment Years
Mandatory Rule for Carry ForwardITR must be filed on or before July 31 due dateLate filing under Sec 139(4) forfeits carry-forward right!Strict Section 80 compliance

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.
6. Can Long-Term Capital Losses (LTCL) be adjusted against Short-Term Capital Gains (STCG)?
No, under Section 70 of the Income Tax Act, LTCL can only be set off against LTCG. However, Short-Term Capital Losses (STCL) can be adjusted against both STCG and LTCG.
7. What is the deadline for tax loss harvesting in India?
To offset gains for a particular financial year, all loss-booking trades must be executed and settled on the exchange on or before March 31 of that financial year.
8. Can unadjusted capital losses be carried forward if I file ITR late?
No, under Section 139(3), capital losses can only be carried forward for up to 8 assessment years if you file your Income Tax Return on or before the statutory due date (typically July 31 for individuals).